Toyota: The Accelerator Crisis
Toyota, the world’s leading automotive company and a global benchmark for quality and continuous improvement stumbled seriously. They faced a recall crisis unlike any they had seen before. As a result Mr. Akio Toyoda, Toyota’s President and grandson of the founder, was called to testify before the U.S. House of Representatives’ Committee on Oversight and Government Reform about the company’s response to the recall. Through the lens of the accelerator crisis, the case documents trade-offs Toyota made while pursuing a marketing strategy-based on quality and customer experience while simultaneously pursing an operational generic cost leadership strategy. Historic information tracks the evolution of the company's early focus on lean manufacturing, quality and the customer to the contemporary focus on aggressive cost control and rapid globalization; it also traces the factors that shaped the context in which the product failures occurred; and documents the failure of Toyota to respond appropriately, and with sufficient speed.
The case discusses Toyota’s evolution from a small entrepreneurial family firm to global industry giant status; their role in driving industry-wide lean manufacturing, continuous improvement and quality, known as the Toyota Way; their responses to a series of highly visible product failures; and the resultant erosion of Toyota’s reputation. The case concludes with Akio Toyoda, exhausted from his testimony, considering which combination of strategic, structural or cultural challenges led to the current recall crisis. Had the company lost sight of its long-term philosophy, a key principle behind the Toyota Way? Had Toyota sacrificed quality and their historic customer focus at the expense of extreme cost reductions? Were non-family managers truly to blame for “hijacking” Toyota? What role did Toyota’s supply chain and keiretsu structure play in the recalls? Or, as some claimed, was Toyota simply subject to the latest media witch-hunt in the wake of the global economic crisis?
he case was written to be used in a course in global strategy and focuses on the strategic, structural and cultural challenges underlying Toyota’s accelerator failure crisis that led to a highly publicized series of recalls. It could also be used in courses focusing on competitive strategy as an example of the limitations of generic cost leadership strategies, and in a global strategy course to highlight challenges of rapid growth, coordination and control. The case fits well into courses in competitive strategy, global strategy, general management, operations management, or crisis management.
Among the key teaching objectives are:
- To allow students to examine challenges of rapid global expansion and related impact on functional operations in a strong culture, highly centralized company
- To examine the potential sources for quality failure as a company pursues a cost leadership strategy.
- To examine the evolution of an organizational crisis and explore response options in managing a high visibility product recall process.
- To examine the implications of misalignment between marketing and operational strategies.