Question

Analyze the reaction of Toyota from an ethical perspective to disclosures that occurred in late 2009 and early 2010 that the accelerator in some brands might get stuck and result in unintended acceleration of the car. How does Toyota’s reaction relate to that of Ford with the Pinto and Johnson & Johnson with the Tylenol poisoning?

Answer 1

Solution

Background of Toyota

Toyota Motor Corporation is a multinational corporation headquartered in Japan. Through tremendous development, it currently boasts about 183 billion in annual sales and is the world’s largest automaker, which has the business of which covers many countries and territories including America, Europe, Africa and Asia (Pride et al, 2009, p243). Since its foundation, Toyota continuously conducted business activities under the guiding principle of ‘contributing to the development of a prosperous society through the manufacture of automobiles’. The guiding principle, as well as Toyota’s CSR policies, serves as the foundation of its business (Toyota Official Website, 2010). However, now Toyota faces a series of embarrassment caused by its vehicle recall. In the beginning of 2010, due to a defect in its accelerator pedals, the company recalled eight million cars around the world (The Times, 2010). The global large-scale recall focalized Toyota once again.

Ethical Problems Involved in Toyota

Apart from its quality defect, more and more people began to accuse of Toyota’s loss of ethics as a big business before and during its recall. Despite under multi-accusation and criticism, lacking initiative, Toyota did not respond timely. Originally, it attributed the safety issue to the floor mats and denied defective vehicles design; subsequently, its quality problems can not be covered up any longer. Nevertheless, in order for protecting its own business interests and corporate image, Toyota still took the chances and did not recall involving vehicles. Even when appearing in the U.S. Congressional hearings, Toyoda firmly insist that electronic throttle control system has nothing to do with the safety issue, throwing the issue of pedal safety to Toyota’s suppliers.

Effects of Ethical Problem to Toyota

At present, Toyota’s recall problem seems not to be curbed but ever-widening. Having recalled a wide scope of vehicles, Toyota still has to face the U.S. criminal probe and litigation. What is more severe, with its market having been seriously affected, Toyota also suffered a crisis of confidence worldwide, which is undoubtedly a deadly threat to the world’s top-ranked automaker. It is considered that Toyota has paid a terrible price due to ethical dilemma rather than quality problems.

Analysis

Toyota Attach Great Importance to Economic Benefits but Neglect Corporate Social Responsibility (CSR).

Toyota exceeds General Motors in 2008 as the world’s largest automaker. It is in this process that Toyota introduced a relentless cost control and simultaneously reduces its concern for quality. Toyoda acknowledged that in the past decades, Toyota was committed to expanding business scale and economic benefits, elevating market share and lowering costs; while giving up priority to product safety. In the harsh reality of competition, Toyota gradually goes away from the traditional Corporate Social Responsibility (CSR) it has been proud of in a sense.

Toyota Puts its Focus on Shareholders but not Stakeholders

From a general view it seems that corporate stakeholders show the trend of proliferation and diversification. Therefore, it is necessary to clarify and thus effectively balancing the interests and needs of various stakeholders. To achieve this, it can draw reference to the Shareholder and Stakeholder Model. The Shareholder Model, known as an external and independent orientation, is to improve the wealth prospects of investors. On the contrary, firms who adhere to the Stakeholder Model promote an internal control focus and will promote its performance and thereby offer favorable returns for stakeholders who share an interest in the company.

Toyota, addicted to the competition with General Motors, has been expanding its global scale. However, its proud ‘Lean Manufacturing’ loses control after rapidly spreading all over the world, with the balance between minimum cost and optimal products being broken. In order to maintain constant revenue, Toyota place cost reduction overwhelmed, largely abandoning stakeholders’ interests; therefore its product quality problems are boomed to arise. In a sense, it is because Toyota ignored a balance of interests of stakeholders that contributed to its present ethical dilemma.

In short, business ethics is going from the edge to the center of management and becomes the strategy of corporation. So any corporation should value ethics and regard it as the starting point of any decision-making and action. Only when its wealth objective is consistent with the expectations and request of both the public and society, it can get enough support and achieve further success.