Business Case Study: Crisis Management at Toyota

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  • 0:03 Background on Crisis…
  • 0:34 Toyota's Crisis Response
  • 1:38 Toyota's End Result
  • 2:30 Strategies for Crisis…
  • 4:08 Lesson Summary
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Lesson Transcript
Instructor: Savannah Samoszuk

Savannah has over eight years of hotel management experience and has a master's degree in leadership.

This lesson will take a look at crisis management when companies are faced with emergency situations. The company used to look at this topic will be Toyota. Then, strategies for crisis management will be discussed.

Background on Crisis Management

A business's leaders do not want to think about dealing with emergency situations, but they should have plans in place, as emergencies can happen. It's like practicing a fire drill once a month. You prepare for it but hope that it does not actually happen. Crisis management is the process that a business goes through when dealing with an emergency situation. This lesson will focus on a situation Toyota faced which demanded crisis management. We will look at the steps Toyota took in this situation, its response, and the end results of the crisis.

Toyota's Crisis Response

Toyota had customers reporting that cars were self-accelerating, causing accidents. Let's look at the steps and the response Toyota had to the complaints that its cars were self-accelerating.

  • The complaints started in November of 2009 about the cars self-accelerating.

  • Toyota approached the situation by trying to offer solutions to the problem before actually looking into the problem. Initially they attributed the self-accelerating to operator error, indicating that it was the driver's fault.

  • Toyota then said floor mats caused the gas pedal to stick and accelerate on its own. At this time, Toyota did not recall vehicles or claim responsibility for the issues that were occurring. It was trying to deflect the blame to keep from receiving bad publicity. Unfortunately, Toyota's response to the issue presented uncertainty to customers and future customers.

  • Toyota did finally announce a recall in January 2010 to address the issue. At this point, the company took responsibility for the issues with the cars, having discovered that the problems were due to sticky pedals. Toyota had a solution to fix the problem and was being public about it.

Toyota's End Result

In situations that involve customer safety, it's imperative that companies act fast. In Toyota's situation, unfortunately, company leaders did not act fast enough to find a solution to the problem. Their initial response to the issue made it seem like they did not value customer safety and that they were not investigating to find a solution. Toyota did finally recall the cars and provide a solution. However, because company leaders did not address the issue sooner and, instead, tried to hide the problem, the company faced class-action lawsuits and litigation. The company ended up paying nearly $1.2 billion to avoid prosecution for continuing to make cars with the faulty parts, for trying to cover up its involvement in the beginning, and for having some responsibility for the customers' lives that were lost due to the malfunction of the cars. Toyota's situation provides an example for companies to make sure they have a crisis management plan in place. Let's now take a look at some strategies for doing this.

Suggested Strategies for Crisis Management

Company leaders don't want to sit around and think about crisis situations; however, they do need to make sure they are prepared in case one does happen to their company. Here are some strategies for companies to use to be prepared for a crisis situation:

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