Tuesday, March 9, 2010

Toyota and its Responsibilities

In recent months, one event has overwhelmingly claimed headlines around the world - Toyota, which has become the largest automaker in the world, has had to recall more than 8.5 million vehicles worldwide due to unintended acceleration and breaking problems in various models. Clearly, the events of recent months will have an effect on the Toyota brand. There are several questions that arise from this episode, the two that I want to tackle here are (a) how badly will the Toyota brand be tarnished? and (b) do Toyota's responsibilities end once it's brand name's reputation is restored?

While it is too early to fully understand the effects that recalling 8.5 million cars will have on the Toyota brand, there are varying degrees of expectations. According to U.S. sales figures released on March 2, nearly all the major auto companies reported double-digit year-on-year percentage sales growth in February, except for Toyota, whose sales declined by almost 9 percent. These figures clearly show that Toyota has taken a major hit due to ongoing safety concerns. However, on the other side of the coin, there are also signs that Toyota's drop in sales will be short-lived - initial reports suggest that chat about Toyota on the social web is positive, relative to its competitors, implying that perhaps there indeed is no such thing as bad publicity. Furthermore, Toyota seems to feel that all it needs to do to lure consumers back is to lower its prices.

It may be too early to begin to assess the full impact of the recalls on Toyota's image but it is not too early to begin to discuss what Toyota's responsibilities are (if any) once it has restored its image and sales figures. The question is, does Toyota only have to worry about restoring its image or does it have a greater responsibility towards ensuring the safety of its cars, beyond what consumers may think they know. The common assumption is that the level of consumer confidence will reflect the perceived safety of the cars, implying that the only way to regain a positive image would be to comprehensively deal with the safety issue. What is often ignored is that it is the perceived safety of its cars that matters to Toyota's bottom line rather than their actual safety. So long as there is no difference between the two, there is nothing to debate. However, in this particular case, in which there are claims and counter-claims about the root cause of the safety issue while cars are still being sold (albeit at a decreased pace), it is evident that what matters most to Toyota is to maintain a positive image as possible rather than ensuring that all of its cars are safe. This case raises the larger issue of corporate social responsibility at large - are companies only responsible for their bottom line (a.k.a ensuring consumer satisfaction) or is there a greater good that they must seek to satisfy?


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