Toyota Recall Crisis
Corporate Risk Management Coursework – Toyota Recall Crisis Report to Senior Management
Introduction
Over the last few years Toyota has been under a lot of pressure as a result of the increasing number of complaints over defective accelerator pedals being reported. Various events and decisions led to the largest recall in the company’s history. The way that Toyota managed the crisis affected not only the company’s reputation but it also disrupted the car industry as a whole.
The aim of this report is to analyse how Toyota handled the crisis, identify the main issues in their crisis and risk management, and give recommendations/point out important aspects in their strategy that need to be improved.
a) Why Toyota failed to identify the risk factors that led to the recall crisis?
In this section we are going to discuss the main mistakes Toyota made that prevented the company from identifying important risk factors. By looking at the key types of risks to which the company is exposed, we are going to analyse how Toyota failed to coordinate its activities with regards to risk.
Being the most efficient car manufacturer in the world, Toyota is, nevertheless, exposed to a wide range of risks. Therefore, a main objective for the company should be to identify what lies in the heart of the business, and how the risks associated can be eliminated or mitigated effectively.
The root cause of the company breakdown was ultimately due to their pursuit of growth. Since Toyota wished to supersede General Motors as the world’s leading automotive manufacturer, this drove them to expand their business at such a rate which in turn led to the neglect of important risk factors.
Operational risk
Product development – For a leading car manufacturer it is of paramount importance to ensure products are manufactured at the highest standard possible and then thoroughly tested before being released on to the market. However, Toyota apparently failed to conduct enough
Introduction
Over the last few years Toyota has been under a lot of pressure as a result of the increasing number of complaints over defective accelerator pedals being reported. Various events and decisions led to the largest recall in the company’s history. The way that Toyota managed the crisis affected not only the company’s reputation but it also disrupted the car industry as a whole.
The aim of this report is to analyse how Toyota handled the crisis, identify the main issues in their crisis and risk management, and give recommendations/point out important aspects in their strategy that need to be improved.
a) Why Toyota failed to identify the risk factors that led to the recall crisis?
In this section we are going to discuss the main mistakes Toyota made that prevented the company from identifying important risk factors. By looking at the key types of risks to which the company is exposed, we are going to analyse how Toyota failed to coordinate its activities with regards to risk.
Being the most efficient car manufacturer in the world, Toyota is, nevertheless, exposed to a wide range of risks. Therefore, a main objective for the company should be to identify what lies in the heart of the business, and how the risks associated can be eliminated or mitigated effectively.
The root cause of the company breakdown was ultimately due to their pursuit of growth. Since Toyota wished to supersede General Motors as the world’s leading automotive manufacturer, this drove them to expand their business at such a rate which in turn led to the neglect of important risk factors.
Operational risk
Product development – For a leading car manufacturer it is of paramount importance to ensure products are manufactured at the highest standard possible and then thoroughly tested before being released on to the market. However, Toyota apparently failed to conduct enough