The purpose of this paper is to address the importance of effective crisis management, and the commensurate lessons to be learned from the Toyota Corporation's denial of malfunctions on a number of different Toyota brands of vehicles during the period 2007‐2010. The case analysis identifies key opportunities the Toyota Corporation had to minimize the crisis by acknowledging the issues and being transparent in its decision making. The article addresses the difficulty now faced by Toyota, previously recognized as the world's leading manufacturer of automotive vehicles, to re‐establish the consumers' trust.
A crisis, typically considered to be a negative issue, can be a positive event in the life of a corporate firm, such as Toyota, if the corporate leadership involved seizes the opportunity to make appropriate changes in its operations. The crisis management paradigm that is the focus for this case identifies four stages of a crisis – the preliminary (pre‐) crisis, acute crisis, chronic crisis, and crisis resolution. The present crisis deals with several different malfunctions that were identified, apparently by customers, in various Toyota brands, but publically ignored by Toyota's management. Therefore, the pre‐crisis stage was not appropriately dealt with by Toyota, and the firm was thrust into an acute crisis that evolved into a chronic crisis. A brief overview of the historical development of Toyota is presented, and a case analysis of the crisis situation in which the firm is now involved is presented in some detail.
It was concluded that Toyota is now in a very difficult position in the chronic crisis stage due to the failure of its corporate leaders' willingness to acknowledge the malfunctions of its vehicles and take corrective actions early in the crisis.
This is an excellent example of crisis mismanagement by a previously recognized world leader. This treatise includes a pervasive focus on the strategic lessons that should be learned from Toyota's experience.
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