The Toyota Recall Crisis

Abstract

Organizations face public relations crises that affect consumer perception of a brand and its products’ sales. During Toyota’s recall crisis in 2009, the company experienced negative reviews from the media and the public, which led to the loss of revenue in the post-recall period. The present paper will investigate how people from different cultures view the Toyota crisis and the responsibility of the company in crisis. The findings of this research will help global organizations understand how to recover in different markets and identify the strategies applicable to maintain consumer support during a crisis (Fan, Geddes, & Flory, 2013). The researcher will conduct a survey through questionnaires, involving individuals from China and the United States to gauge their knowledge and opinions about the Toyota crisis. Additionally, the study will include interviews of consumers or employees at Toyota from both countries to identify their views on the issue. Through a comparative analysis of the data collected from the surveys by the potential consumers or employees, the findings of this research will be valuable in determining how the recall crisis influenced the company’s brand reputation among consumers from different cultures.

         Keywords: culture, Toyota crisis, communication strategies, public response

 

Introduction

Organizations around the world face crises every day. Some crises are small and easily addressed while other crises can have negative long-term effects on the company. Crisis communication is essential in addressing stakeholder and public concerns because it helps firms to repair their public image and minimize any losses to the organization and to its stakeholders involved in the crisis (Fortunato, 2008). Crisis communication falls under the public relations function in most organizations. Kent (2010) defines public relations as “the process through which firms collect information about their operations and control how such facts reach people and influence the views of the stakeholders” (p. 706). Public relations is an essential tool during crisis management as it defines how the firms, the media, the government, and the public shape the interpretation of crisis among the stakeholders.

            Many high-profile organizations have experienced crises over the last decade. Toyota is the topic of this master’s project. Toyota is one of the most reliable motor vehicle brands in the United States along side General Motors and Ford (Toma, Marinescu, & Grădinaru, 2018). Moreover, the company has been one of the most rapidly growing brands in the world and poses a serious threat to its key competitors. In 2000, the organization made a drastic move to lower the cost of its products by substituting Toyota made car parts for lower priced parts. Their sales in the United States increased, and it passed Ford for top car sales in the United States. However, Toyota was under threat when its brand came under scrutiny for the design of its vehicles and the impact of the cost-cutting measures on safety.

Toyota’s brand reputation came under threat in 2009 when an accident involving a Highway Patrol Officer and his family prompted a series of investigations into Toyota cars’ safety. The case escalated into media and blog reports speculating the cause of the accident and the involvement of Toyota in the issue. The 911 call made from the car indicated that it was increasing speed out of control and that the vehicle’s brakes were not working. When other reports of self-accelerating cars came to light, Toyota was forced to recall over eight million cars around the world. Unintended acceleration in cars caused 90 deaths and 50 injuries, and customers all over the world were concerned about the vehicles’ safety.

Toyota’s approach to handling the issue and the series of government and media reports created a variety of ups and downs for the brand. The response to the crisis led to concerns that Toyota was withholding safety information from its consumers. Toyota and its dealers lost billions of dollars from the recalls and lost revenue during the crisis (Andrews et al., 2011). Relationships with publics and consumers also suffered (Piotrowski & Guyette Jr, 2010). The crisis communication strategy adopted by Toyota had negative impacts on the company’s performance and their brand’s reputation.

The purpose of this project is to investigate how public relations and crisis communication affected the outcomes of the Toyota recall case in 2009 and 2010. The first section will offer an introduction to crisis communication literature, the Toyota brand, and the 2009-2010 crisis at Toyota. The first part of the literature review will cover the various theories that affect cross-cultural communications. The second section will offer a review of the secondary and primary sources on crisis communication, the Toyota crisis, and the company’s response to it. The third section describes the three research methods used to explore how members of the public understand the Toyota brand and the recall crisis. The first part of the methodology is a detailed content analysis of elite media coverage of the recall. The analysis of the media contains various themes related to both instances, such as in the annual report and the sample. The second part of the methodology is a survey of 95 automobile owners. The participants provided quantitative data on the crisis and the recall. The final section is a qualitative interview of two key informants from the two cultures. After the discussion of the results, the project includes recommendations to improve the relationships in the two leading markets, America and China.

Literature Review

Overview

The review of literature includes the role of culture and related theories that affect operations across cultural backgrounds. Multinationals operate and serve consumers across the world.  They have to handle variations in cultures in their communication and marketing efforts. Cultural diversity affects the way people receive information from companies. Consequently, organizations have to design their communication in a manner that meets the needs and expectations of the public (Stieglitz & Krüger, 2011). In most instances, executives communicate to publics differently depending on culture and context. Consumer perceptions and expectations of a brand will influence the most appropriate corporate behavior to meet customers’ needs.

Chinese and American cultures vary on aspects of communication, particularly in the context of how companies operate. Businesses are expected to conform to the norms of society and meet people’s needs (Piotrowski & Guyette Jr., 2010).  But what happens in a crisis that transcends many countries and cultures? How do organizations tailor their crisis communication to global audiences who may have divergent cultural frameworks to interpret the crisis?

The purpose of the literature review is to explore how the Toyota crisis was influenced by the legal and cultural contexts in the two largest markets in the world—China and the United States. The research is informed by the need to understand the influence culture has on public responses to crisis. Potentially, due to the differences in cultural responses to crisis, companies might have to adopt different communication channels and models to appeal to customers in different regions. The study will be based on a review of literature on various theories explaining the role of communication in companies operating across cultures. Toyota’s success in communicating with stakeholders in different cultures affected its recovery from the crisis.

The review focuses on the theories relating to culture and communication to explain their influence on the way Toyota overcame the crisis to regain its trust among stakeholders, including customers. The analysis will discuss various theories that can explain the initiative made by the company to solve the issue and the potential gaps in the approaches and strategies the management undertook. Hofstede’s Cultural Dimension Theory relates to the influence of culture on various aspects of a company, including response to crisis and the channels used to communicate in such circumstances. The theory explains the way the organization would communicate differently targeting people from diverse cultures. Two approaches; uncertainty reduction and uncertainty avoidance, explain how the company could communicate to the audience in different cultures to address the crisis. The literature review discusses uncertainty avoidance as one of the dimensions in Hofstede’s Cultural Dimension Theory. Besides the theories that explain the role of culture in crisis and communication, the literature review describes how culture affects the communication strategy and possible outcome in different markets. 

Hofstede’s Cultural Dimension Theory

Various theoretical frameworks explain the role of culture in communicating during crisis since the differences inform the reception of a message and the way people respond. One such model is Hofstede’s cultural dimension theory. It explains why different cultures react differently to the crisis and the communication strategy used by the company to address it. A company should understand the various aspects of culture before deciding on the approaches to communicate with target customers (Hofstede, 2001). The theory has five dimensions as discussed below.

The first aspect is the power distance index (PDI) measures the distance between societies with different cultures. It considers the proximity of the members of a culture from different power statuses and their willingness to recognize the distance (Hofstede, 2001). It also deals with the fact that not all people in society are equal and the prevailing attitude towards the differences. The disparity influences the way individuals accept and react to challenges and opportunities.

Cultures differ in terms of the power distance index. For example, China’s index is 80, while that of the United States stands at 40 (Hofstede, 2001). In China, inequality is mostly acceptable, with highly polarized subordinate-superior relationships. The dimension determines the acceptability of abuse by superiors in every culture, and in China the defense against such acts is minimal. Unlike the Chinese, Americans are close to the centers of power and tend to influence how the country runs. The culture is mostly against inequality in society and encourages equitable aspirations among people. The dimension plays a vital role in the way individuals understand and appreciate differences.

The two countries would differ in the way they responded to the Toyota crisis and the communication efforts to address it. The Chinese would be more accepting of visible efforts to address the issue, while Americans would be more skeptical because of the power distance index (Xiumei & Jinying, 2011). The U.S., unlike China, allows room for questioning authorities because of the perceived right to social protection. Therefore, companies should consider such aspects when designing crisis communication strategies. 

Countries differ in terms of individualism or collectivism levels. Individualism versus collectivism (IDV) index measures the extent to which a nation is individualist or collectivist. States, where people focus on individual interests, are considered individualistic, while countries concentrating on the general social good are collectivist (Hofstede, 2001). These characteristics play a vital role in the way a company approaches different people.

Countries differ in relation to the level of interdependence they maintain among citizens. This indicator considers the “I” or “We” of identity within a society. China scores 20, while the United States has 91 in individualism (Hofstede, 2001). Individualist societies encourage their members to mind their interests and those of their immediate family. In collectivist cultures, in contrast, people belong to communities and care about each other’s interests. The United States is an individualist, while China is a collectivist society.

Cultures perceive communication differently depending on the individualism or collectivism (IDV) measures. Therefore, marketers should understand the communication strategy that appeals to people in a specific society, depending on whether they have collectivist or individualistic ideals (De Mooij, 2015). For example, in China, communicators must appeal to the collective needs of the society, while in the United States they must communicate and convince individuals. Therefore, the dimension reveals the importance of developing customized communication strategies to address a crisis depending on the needs of a particular market.

Some cultures tend to be more masculine than others. The masculinity dimension (MAS) refers to the degree of power as well as assertiveness within a society (Hofstede, 2001). Furthermore, the dimension is associated with role distribution within a society. The aspect determines how information is acted upon by different sectors of a community, depending on culture after it has been received. Highly masculine societies are characterized by increased competition and focus on achievement and success. Countries that are more feminine tend to care for others and quality of life.

The United States scores almost the same with China in terms of the masculinity dimension (MAS). At 62 (U.S.) against 66 (China), the two countries are most likely to be driven by competition and aspirations (Costa, Crawford, & Jakob, 2013). The masculinity dimension is higher in paternalistic societies. These roles are demarcated and determine the society’s reactions to issues affecting it (Hofstede, 2001). Men are more likely to be vocal compared to women.

Companies should understand the masculinity dimension (MAS) to develop effective communication strategies targeting different markets or societies. From the perspective of the United States and China, the two would be motivated to achieve positive results even when faced with a crisis (Bakir, Blodgett, Vitell, & Rose, 2015). Therefore, marketers should strive to address crisis effectively to outdo competition and appeal to consumers in highly competitive masculine markets. After all, the countries are driven by the need for success in all their operations.

While some societies make long-term decisions, others tend to be short-term oriented. Long-term or short-term orientation (LTO) is the frugality, perseverance, and the necessity of ordered relationships in a culture (Hofstede, 2001). Countries that rate high in long-term orientation tend to maintain some connections with the past while addressing present and future challenges. At 87 against the United States’ 26, China is more long-term oriented and prefers to resolve issues to ensure future success. The Chinese also create measures to counter emerging problems that might affect them in the short and long term. Conversely, the United States maintains time-honored traditions and norms when addressing crisis (Atchley, Shi, & Yamamoto, 2014). Therefore, in such situations, communicators should consider the differences to create effective strategies that appeal to a particular culture.

Marketers should understand the dimension when communicating with the market, especially during crisis. For example, China is a highly pragmatic culture, believing in the value of the truth depending on the context, situation, and time (Atchley, Shi, & Yamamoto, 2014). Therefore, companies should be honest when communicating during crisis. They should strive to adapt their communication strategies to the needs of the particular market.

The fifth dimension considers the reality that the future can never be certain. The uncertainty avoidance index score (UAI) shows the level of tolerance for uncertainty in a culture. Some cultures are more capable of accepting uncertain situations than others (Hofstede, 2001). The cultures that are more tolerant can adapt to changes better than less tolerant cultures.

Countries score differently in their capability to deal with the uncertain future. Uncertainty causes anxiety, but societies have developed different ways of dealing with it. The United States is more likely to accept uncertainty since it scores higher (46) compared to China (30) in this dimension (Hofstede, 2001). Therefore, China is more likely to create beliefs and institutions to avoid ambiguity (Rieger, Wang, & Hens, 2014). The measures play a role in dealing with anxiety and unknown outcomes of a crisis.

The theory explains why people are likely to respond to issues such as the Toyota crisis. Companies should understand the nature of the society and its ability to deal with challenges to create effective communication strategies addressing anxiety. For example, China is more likely to prefer the truth than the United States, especially when faced with crisis, because loyalty is rated highly in the country (Karahanna, Williams, Polites, Liu, & Seligman, 2013).  Crisis communication strategies should be informed by the understanding of the differences between the markets.

 

Uncertainty Avoidance Theory

Uncertainty Avoidance Theory emerges as a critical dimension measured by Hofstede (2001). The theory relates to the level of tolerance of uncertainty within a culture, including measures to avoid ambiguity that causes anxiety. Just like uncertainty reduction theory, it reveals people’s response to such situations. However, while uncertainty avoidance theory considers actions taken to avoid uncertainty, uncertainty reduction explains measures such as information seeking that enable people to deal with such issues. Uncertainty avoidance also refers to the way a social group reacts to uncertainty or ambiguity. According to Hofstede’s study, the U.S. scores 46 in the dimension, which is low uncertainty avoidance. The score means that the U.S. is highly accepting of new ideas and innovation (Hofstede, 2001). Therefore, cultures can either be uncertainty avoiding by putting measures, including rules and regulations to prevent such situations. Some will seek the absolute truth in all situations.

The case of Toyota presents a typical example of an uncertain situation. Thus, the reaction by the people depends with whether the society is tolerant to uncertainty. The company would be better in dealing with the crisis when operating in cultures that are more comfortable with uncertain or ambiguous situations. Communication is the most effective method to help consumers to deal with uncertainty (McCormack & Ortiz, 2017). However, acceptance of the message depends on the level of tolerance of ambiguity within the culture. While some cultures implement means to reduce uncertainty, others seek ways such as adequate information to reduce the impact of uncertain situations.

Uncertainty Reduction Theory

Rather than seeking approaches to avoid uncertainty, some people and cultures assume means to reduce its impact. Uncertainty reduction theory explains the role of information in achieving the reduction objective. Charles Berger and Richard Calabrese developed the model in 1975. They indicate that people seek information when communicating to understand the second party and, hence, reduce uncertainty (Berger & Calabrese, 1975). During the process of communication, individuals attempt to learn about each other and use this knowledge to reach a conclusion. One of the essential aspects of the theory, particularly in a business environment, is that learning about other people’s behavior shows how they are likely to act.

According to the theory, reducing uncertainty makes it easier to understand how individuals react to different situations and make the best choices. For instance, when a company invests in learning about the nature of its consumers, they can better respond to news about the firm (Bowen & Zheng, 2015). Reducing uncertainty is critical in improving the capacity of different entities to make appropriate decisions about businesses. Clear communications is one of the ways of preventing uncertainty in business. Another related theory that applies to the uncertainty caused by the crisis is uncertainty avoidance.

Cultural Effects of Communication Strategies and their Effects

Culture is important in the way companies define their communication strategies to appeal to their audience. The aspect is particularly significant in crisis because the effectiveness of information sharing determines the success in addressing the situation and reaction of stakeholders (Ulmer, Sellnow, & Seeger, 2017). The communication strategy designed during such situations is aimed at controlling the environment depending on the cultural aspects of the target market (Olsson, 2014). Therefore, Toyota needed to understand the cultural differences and the way different people receive and process information to be successful in sharing information about the recall to mitigate the effects of the situation. Consumers’ reaction to the recall was necessary for the future operations of the company in the two of the leading global markets, the United States and China.

The second section of the literature review focus on crisis communication, the actual crisis that affected Toyota, and the way the company responded.

Crisis Communication and Public Relations

Crisis management is one of the most important roles of the public relations departments of corporations. In a crisis, company leaders have to identify the type of challenge facing the firm, the stakeholders involved, and the role of third parties in the crisis. Some cases, such as natural disasters, involve broad groups of publics, while other events, for instance, layoffs, affect more narrow groups such as employees. The organizational leaders must provide a solution strategy that minimizes the negative effects of the crisis on the company’s sales and any other interested group (Xiong, Taylor, & Kent, 2016). Crisis management includes identifying the events leading to the crisis and avoiding such undesirable occurrences in the future. Additionally, crisis management often needs to be responsive to third parties such as federal agencies may carry on investigations, which may affect the outcome of the crisis solution approach. Company managers must identify all the factors involved in the crisis and establish the most effective strategies to handle it. One public relations strategy is known as image repair.

Image Repair as Crisis Response

The image repair theory resulted from the findings of crisis cases analyzed by theorists on the impact of crisis management by organizations and individuals (Coombs, 2007). Image repair theory is rhetoric and relies on language and persuasion to resolve conflicts in institutions. The major theorists in this area include William Benoit, Susan Brinson, and Timothy Coombs. Their observation led to five major strategies of image restoration during a crisis that has affected the reputation of companies, namely denial, evasion of responsibilities, reduction of offensiveness, corrective action, and modification. The table below shows the summary of these strategies and their sub-strategies.

Strategies Sub-strategies Explanation
Denial Simple denial Simply denying the issue exists or  affects the said victims
  Shifting blame The individual or organization shifts the blame of the crisis to other parties such as suppliers
Evading responsibilities Provocation Claiming that the act was in response to provocation by the victims or other parties
  Defeasibility The firm says  it was not have the facts on the possible impact of their actions
  Accident Claiming that the incident was a mere accident and out of human control
  Good intentions This sub-strategy involves the response that the firm’s actions were based on good intentions
Reducing offensiveness Bolstering This is a strategy that involves  the stressing of the good attributes
  Minimization It is when the company demonstrates that an act is not as bad as it appears to be
  Differentiation This is where companies provide proof that an act is not as bad as other similar events
  Transcendence The sub strategy considers other more important issues to the victims or customers
  Compensation Identifying the victims, their losses and compensating them for damages
Corrective action Solve the problem Providing a solution for the problem by treating its causes
  Prevent The firm provides evidence of its attempts to prevent a crisis
Mortification Apology The company accepts blame and asks for forgiveness from the victims

 

Image repair begins with the identification of the specific actions that have created a crisis or complaints from the public. During image restoration, managers must identify if they are held responsible for the action or if the crisis viewed to be offensive by the public. During a crisis, managers can deny the claims of the public or the individuals making the accusation. This approach takes two approaches; either denying that an act was committed or that such an action can cause harm to the users of products.

Image restoration could also take the form of shifting blame to the users of the products, suppliers, or other companies involved in the case. A company can also evade the responsibility for the crisis by indicating that it was protecting itself from another company or stakeholder group. Moreover, some firms evade responsibility by claiming lack of knowledge or awareness of the harm resulting from their activities. They attempt to prove that they could not have intentionally put the lives of their customers in such a risk and that their actions were in good faith. A common approach, in this case, is claiming that the result of a crisis was a mere accident and the firm is not responsible for its impact.

Businesses can respond to a crisis by reducing the offensiveness of the crisis to the company’s reputation. This approach identifies the ways in which the business might enforce positive feeling among the views of the public. Benoit (1995) observes that this repair approach aims at directing the public and potential consumers to the possible benefits of an act. Companies can use the bolstering sub-strategy where they stress the good attributes associated with the crisis to divert attention from the negative results. Additionally, they can apply the minimization strategy, showing that the results of their actions are not as bad as they appear. Moreover, there is the differentiation sub-strategy that demonstrates that the crisis is not as negative in comparison with other similar events. The transcendence sub strategy aims at convincing the public to consider more important essentials about the victims or the organization. 

Image restoration may take the form of a corrective action where companies spend money to recover the state of affairs before the crisis. This strategy could involve providing a solution to the problem to prevent more harm for people or communicating how future products will be modified to avoid similar cases. On the other hand, the mortification approach is where companies beg for forgiveness after taking responsibility for their actions and expressing remorse. This is the process through which companies show distress and regret their actions that are harmful or shameful.

Crisis Communication and Brand

A company’s brand is the name, design, or symbol that the organization uses to define its products and distinguish them from the competitors. Brand is essential as to helps customers remember the products of the firm and gain an impression of the firm. Additionally, the brand is the representation of the services and products of the organization and their associated quality. PR works hard to maintain a positive brand image as it affects the likelihood of customers to keep buying the company’s products rather than those of its competitors.

There are many factors including the amount of information and how people obtain the details on the issue at stake when a company is dealing with a crisis. Crisis communication is an essential aspect in repairing an organization’s brand during and after an unintended negative event. Additionally, organizations must account for other stakeholders such as the media and whistleblowers in the firm whose views about the crisis may affect the public’s perceptions of the company. According to Coombs (2007), the three parties in a conflict, namely the victims, the random group, and the preventable cluster, have different perceptions and attributions for blame in a conflict. Crisis communication helps to manage how the information concerning the conflict is processed and affects the image repair process (Benoit, 1995). By influencing the distribution and meaning of information about a crisis, the company managers aim at retaining the firm’s reputation and a positive image.

 Public information refers to the process through which corporations manage the flow of information within their organizations and among the public (Kent, 2010). Crisis management has been a critical focus of public relations studies with most researchers focusing on how different companies address the spread of information during a critical situation. The impact of a crisis on a brands reputation and the role of the media have by far been the essential aspects of crisis management and public relations (Xiong et al., 2016). Since there are many types of crises that could occur in an organization, the groups affected and the level of influence on each stakeholder group should be essentially considered. Public relations include identifying how the company publicizes the impact of the crisis and the problem-solving approaches adopted by the firm.

Crisis management is a key responsibility of an organization’s leadership and the approach they choose affects their image recovery. Toyota’s strategy influences the capacity of the firm to regain trust for its brand and recover the lost revenue. Companies should use crises to show their concern for their customers and their devotion to the welfare of the product’s users. Investigating the issue and taking control of the information about the crisis is an essential aspect of its management, which helps in image recovery. Leaders should also consider the role of the third parties including the government agencies and the media in the effectiveness of their crisis management.

The Toyota Crisis

The Toyota crisis led to the death of people in accidents associated with acceleration defects in the company’s cars. In particular, Mark Saylor, his wife, daughter, and his brother were killed when their car went out of control and crashed. These and other unreported incidents endangered the lives of Toyota car users. The unintended acceleration in Toyota cars risked the lives of the company’s consumers, the passengers in their cars and other road users. The number of unintended acceleration incidents involving Toyota cars was highest during the crisis as indicated by figure 1. Additionally, the crisis led to concerns on the safety of the car owners of the models associated with unintended acceleration. NHTSA had increased the number of models from the company under investigation following claims of acceleration and electronic throttle defects (Maiorescu, 2016). The crisis was an inconvenience to the car owners whose vehicles were recalled over safety issues. 

 

Figure 1: Unintended Acceleration Incidents and Deaths (NHTSA, February 2011)

The crisis also affected the company’s brand reputation and sales all over the world. It began in 2000 when Toyota reported that it would be cutting the costs of operations by $10 billion between 2000 and 2005 by replacing key components in its cars. In February 2004, the National Highway Traffic Safety Administration (NHTSA) began investigating the brand’s models for unintended acceleration and the failure of electric throttle systems, but no faults were found at first. The investigations began with the Lexus ES300 2002 and 2003 models but later extended to other cars and were intensified by increasing consumer complaints and accidents. Toyota had blamed CTS Corp, its supplier, for pedals causing accidental stickiness and malfunctions (Kim & Bailey, 2010). However, the August 2009 crash of a Lexus ES350 2009 model led to public concerns on the safety of their cars and NHTSA investigations. The company responded to the crisis by recalling eight million cars all over the world and on February 2, 2010, a federal grand jury was convened on the issue. The grand jury demanded to see the documents of on the unintended acceleration of the Prius hybrid model. The jury ruled against the corporation, finding that the company was criminally responsible for the way it handled the issue. 

Date Event
2000 Toyota launches a cost cutting strategy focused on 180 of its car parts by 30% saving the firm $10 billion by 2005
February 2004 NHTSA investigations on the malfunctions in Lexus ES300, but no defects are found
31st December 2004 20% of unintended acceleration connected to Toyota cars
August 2005 NHTSA opens another review of electronic throttle and acceleration defects of 2002 to 2005 Camry, Solara, and Lexus ES cars from Toyota
2006 Toyota head Katsuaki Watanabe apologizes for glitches with the cars’ quality and delays release of new models
March 2007 NHTSA investigates 2007 model of Lexus ES350.
August 2007 Car crash involving 2007 Camry car intensifies investigation
September 2007 Dimitrios Biller, Toyota former attorney, claims the corporation concealed evidence
31st December 2007 23% of unintended acceleration cases from Toyota cars 
April 2008 NHTSA investigates 2004 Sienna minivan for unwanted acceleration and Toyota recalls 26,000 cars to replace the floor carpets in January 2009
August 2009 Investigators find that the fatal crash of a 2009 Lexus ES350 resulted from pedal entrapment by a floor mat
October 2009 Toyota recalls 3.8 million cars in the United States on the request of NHTSA
31st December 2009 33% of unintended acceleration cases were from Toyota cars
16th January 2010 Toyota says their supplier CTS Corp is responsible for the sticking defect of accelerator pedals
21st January 2010 Toyota recalls 2.3 million cars
26th January 2010 Toyota suspends the sale of eight car models under the order of NHTSA
29th January 2010 Toyota sales in the United States drop by 16%
2nd February 2010 Fresh investigations by NHTSA on Toyota cars’ electronic throttle control systems and consumer complaints
5th February 2010 President Akio Toyoda apologizes for the safety issues of Toyota cars
9th February 2010 500,000 Prius and Lexus cars recalled for braking issues and Akio Toyoda considers visiting the United States
22nd February 2010 Toyota reports that a federal jury subpoena and that the U.S. Securities Exchange Commission was reviewing documents on disclosure practices by the company

 

Public Response to the Crisis

Public relations helps an organization to relate to people and allows information to be shared among stakeholders. Public relations professionals play a key role in informing the public about the impact of the companies’ activities on customers or investors. During a crisis, for instance, it is the role of the public relations to communicate the measures that the firm is taking to mitigate the impact of the disaster. The public relations department of a corporation, therefore, identifies the amount and types of information that needs to be shared with stakeholders. They share vital information on how the activities of the firm will influence the users of their products and the impact on their welfare. If a company decides that a product is unsafe for the customers, it is the role of the public relations department to communicate the way forward, including any upcoming recalls of the products.

Media play an important role in how crisis communication reaches stakeholders. The representation of the crisis by the media negatively impacted the opinion of the market on Toyota’s brand and the safety of its vehicles. Fan et al. (2013) illustrated the situation behind the fall and the rise of the company’s reputation and the influence of media involvement. In 2009 and 2010, newspapers, blogs, forums, online newspaper, and other media sources covered both negative and positive information on the crisis and the company’s response. The lack of consistency in the Toyota’s response led to an increase in negative media publications in the first quarter of 2010 (Kent, 2010). Initially, the company cited that quality glitches in their cars were responsible for the unintended acceleration through an apology in 2006. In September 2007, it was determined that the floor mats be found to cause pedal entrapment while there were claims that the company  was concealing documents. In 2009, moreover, the company blamed their supplier, CTC Corps for faulty accelerator pedals. The company only agreed to cooperate with the investigations of NHTSA into its products in February 2010. Criticism over the management’s response to the crisis led to the decline of Toyota’s brand reputation but the predicted opinion changed over time as the talk about the crisis reduced.

The existence of other stakeholders, including the customers, shareholders, the media, the government, and the public, affects image restoration. There were several key players in the Toyota recall crisis management strategy. Maiorescu (2016) observed the approaches used by Toyota in regard to the influence that government institutions had on the brands’ reputations. Toyota’s strategy involved directing blame to the National Highway Traffic Safety Administration (NHTSA) in the United States for the slow response to the issue. However, this method was only limited to the safety incidents in the country and seemed doomed to fail after similar acceleration situations occurred in China and Europe. Maiorescu (2016) demonstrated that General Motors responded differently by promising a corrective approach to their ignition-switch crisis. While Toyota had recalled cars, whose models presented safety problems, their response was based on a defensive context (Maiorescu, 2016). General Motors, on the other hand, accepted responsibility for their actions and took measures to present future disasters. While the public opinion on the company dropped slightly during the crisis leading to recall of ignition switches, General Motors quickly regained its reputation. By allowing the media to access documents on the faulty switches, the firm received a positive response that boosted its image recovery recalling crisis.

In addition to regaining consumer trust and reputation, companies manage crises to influence future purchases and profitability. Choi and Chung (2013) found that while expressing remorse and compensating the individuals directly affected by a crisis increased public trust in the Toyota brand, it did not have an immediate impact on sales. Choi and Chung (2013) conducted a research in October 2012 on the role or apology on reputation restoration for Toyota after the recall crisis. Their findings showed that Toyota’s compensation to the relatives of the victims in its crisis convinced the public that it was sincerely apologetic. Nevertheless, their approach did not lead to purchase intentions at least in the short-run as the consumers were yet to trust the brand’s safety.

 An organization’s management approaches to consumer concerns affect the public opinion on the firm and its leadership. Piotrowski and Guyette (2010) conducted a survey among college students and members of the public on the impact of the crisis management strategy at Toyota. Most of the participants indicated that they did not trust the leadership of the company and that it had failed to perform its duties. Survey respondents specifically cited the lack of transparency and the issue’s influence on brand loyalty indicating that Toyota may not recover from the crisis.

However, social media has become one of the most essential sources of information and rumors during the time of crises as Oh, Agrawal, and Rao (2013) observed. Social networking has gained significant importance in crisis communication and immediate response by the public. Burgess et al. (2013) demonstrated that companies have to account for the spontaneous development of on-line reactions from virtual groups. Social media can be constructive or destructive to image restoration measures, depending on how companies use this resource to manage public relations. While Facebook, Twitter, and other online platforms are essential communication tools, the messages that get to the public and their impact on image restoration must be controlled. The image restoration process should consider the rumor theory in determining the appropriate approach towards solving the problem.

A significant consideration during crisis management is the capacity of organizations to minimize damage to their sales through timely response to the crisis. Heller and Darling (2012) investigated the lessons that could be learned from the Toyota recall crisis and noted the role of timely response. During the first quarter of 2010, the media spread speculations about the recall crisis as Toyota withheld facts about compensations to victims and the safety issues with their vehicles. The public felt that Toyota had provided misleading information about their safety (Heller & Darling, 2012). The delayed response and out-of-court settlements that had been kept secret had detrimental impacts on the firm’s reputation. The public had the perception that Toyota had not taken enough control measures to protect the users of their products and was more concerned with avoiding blame.

Organizations have to consider the role of crisis communication and management strategies on their reputations. The methods used by Toyota and General Motors determined the media and public opinion on the crisis and its impacts on people using their products. Understanding the key role of image restoration strategies is critical in maintaining the company’s reputation.

This research investigated the literature on Toyota’s crisis communication strategy and its impact on the company’s brand image.  Applying the theories and the actual response by the company promotes the following research question.

RQ1.  What kind of media and communication strategy was helpful for Toyota Company to restore the image after the recall crisis with the Chinese and American public?

RQ2. How did culture affect the crisis communication strategy of Toyota to restore its image after the recall crisis with the Chinese and American public?

RQ3.  How did culture affect the consumer response to the recall and market performance henceforth and how is Toyota’s brand image 10 years after the initial crisis?

RQ4: What is Toyota’s key message to consumers and regulators today?

Research Methods

            The study is based on both quantitative and qualitative data collected American and Chinese.

The research will use media research to obtain information on the approach that Toyota took to handle the crisis. Moreover, the media research will indicate the impact of the company’s approach to the public opinion and the brand’s reputation. The method will, moreover, involve the review of Toyota’s press conferences to identify how the managers at Toyota handled information about the crisis. The research will compare the actions taken by the company and the role of public relations with the image restoration rhetoric strategies. The outcomes of this analysis will be the rationale for the outcome of the image repair process at Toyota. This research compared the Toyota reports with the information provided by the media. In particular, this paper compared the news reports from the New York Times with the communication of Toyota. This research summarized the main themes in Toyota’s strategy and compared them to the media reports by the New York Times. This paper compared the main themes of Toyota with media reports. The method used for this research was content analysis where the media information was proportional to the public’s perception of the case. New York Times was selected as the most appropriate source of news media since it was viewed as credible source.  The research summarized the information from articles published between 2011 and 2014. The analysis was performed based on the three themes of employee, products, and services.

Themes in Toyota Annual Report

Theme 1: Employee Motivation, Training and Rewards for Excellence

Toyota trains the members of the workforce to ensure that they are well prepared to deal with challenges of the work environment and meet the needs of the customers.

According to Toyota (2014, 5), “Our employees are skilled, motivated and flexible, and our business model is sound, supported by a network of strong dealerships.” The company credits their success to the capacity of the employees to deal with the dynamic work environment in the motor vehicle industry. The company’s president Akio Toyoda said, “I strongly believe we can reawaken the creative spirit in our own employees and accept the challenges of facing a new future” (Toyota, 2010, 2). Toyota rewards employees who have exceeded the company’s prospects to motivate the company’s workforce. The organization recognizes the exceptional performance of employees and rewards their efforts to ensure their loyalty.

Theme 2: Production Efficiency

            The Company restructured its operations into four business units, an approach that enabled unit leaders to make quick decisions using onsite and hand-knowledge.

Restructuring is a critical issue in the company’s business model. The plan is for the company to increase the efficiency of decision making and provide opportunities for future growth. The organization intends to “Achieve efficient business management at the local level by reducing the number of directors and cutting away some layers of decision making” (Toyota, 2011, 10). Profits come from an agile system of manufacturing that allowed the company to make better cars discretely. Toyota maintains competitiveness by cutting the operational costs while delivering high-quality products to the stakeholders. In the Toyota report (2013, 3) the company is, “Cutting costs by improving manufacturing methods, and boosting productivity by enhancing operational efficiency.” Such measures ensure that the corporation is capable of selling high-quality vehicles to their customers.

Theme 3: Customer and Community Service

Its purpose and passion as well as stakeholder’s perspective is to establish good relationships with the stakeholder groups and improve the brand perception. The company aims at improving the experiences of the customers and the society by producing the cars that meet the market needs. Toyota stated, “We have been aiming to establish a cycle of developing “better cars” that are accepted by our customers and society” (Toyota, 2012, 44). The aim of the firm is to ensure that the vehicles sold to its clients meet the needs and expectations of the target market. Toyota undertakes programs that are aimed at benefiting the members of the community. In the Toyota report (2013, 5) the company states, “Employees also visited primary schools for children suffering from AIDS and primary schools located in rural areas.” Such efforts are aimed at making a positive impact on the community in general to ensure public support for the company’s operations.

Sample

This research used the judgmental sampling technique to select a sample of New York Times articles that talked about the Toyota Company from 2011 to 2014. The key word was “Toyota”. The New York Times was selected as it is an elite newspaper that influences opinion leaders. There were a total of 1,144 articles mentioning Toyota. A total of 84 discussed the Toyota company as the main topic of the news article. Out of these articles, 39 were selected and used for this research to investigate the themes observed from the Toyota crisis. There are 12 articles for 2011, 9 articles for each year from 2012 to 2014.

Themes in Sample

Theme 1: Employee Motivation, Training and Rewards for Excellence

Seven articles (17.49%) included the theme that Toyota was putting significant efforts to increase employee motivation, training and rewards for excellence. The theme was evenly prominent between 2011 and 2014. The main idea is that the company is allowing the employees to have greater freedom to innovate and is encouraging employees to put their heart and soul into the job. According to New York (2012) the “Japan’s biggest automaker, said it was overhauling its development system to give engineers more freedom to experiment with bolder, more daring designs.” The company is giving the workers more freedom as a way of motivating them to work towards the company’s common goals of achieving effectiveness. Toyota’s goal is that the employees will be motivated by the new work structure instituted at the firm. Toyota aims at accomplishing the company’s goals by motivating the employees to work towards their group responsibilities.

Theme 2: Production Efficiency

Twenty-eight articles featured the second theme of production efficiency (71.79%). Most of these articles introduced new Toyota products including the innovations in the gas-electric hybrid Prius. The theme was prominent in the years 2011, 2012, 2014 when the company was increasing efficiency as a way of meeting the company’s goals. New York (2012) notes “The automaker has been seeking to reassure consumers about the quality of its vehicles since then.” The main idea in these articles includes the fact that the company had resolved the main issues from the conflicts and emphasize all their products are reliable and high-quality. According to the articles, moreover, show the intention of the company to improve the equipment and supply chain.

Theme 3: Customer and Community Service

There were eight articles (20.51%) that demonstrate the theme of customer and community service. The articles were more prominent towards the end of 2012 and in the beginning of 2013. New York (2012) notes that the Toyota “is adopting interactive bar codes across all its marketing so mobile phone-carrying customers can quickly access sales promotions, vehicle quotes, videos, safety tips and similar information.” This shows that the company is investing in the development of measures that will improve the interaction between the firm and their customers. These articles highlighted Toyota’s capacity to meet the needs of the stakeholders. Different programs are aimed at attending different programs to meet the needs of the customers including satisfaction campaigns. The articles provide a review of the perception of the customers on the company’s settlement plans for the damages experienced from the accidents.

Media and Toyota Reports

Most of the company information about the communication crisis is found in the New York Times newspaper. This factor makes the newspapers an important source of information based on the amount of content that was published about the communication crisis. The amount of information about the crisis was dependent on the changing views of the people on the reputation of the organization. As Toyota’s communication crisis began gaining recognition the media increased the amount of information published about the company.

Results of the Qualitative Method

As more people began to talk about the company, they motivated the media to publish content about the company. The media concentrated more on the second theme since it was affected by the scandal about low-quality productions. The company aimed at convincing the customers that it would deliver quality products to the customers. The company’s initial approach to deny its involvement was unsuccessful since it contradicted the media reports. The company’s reputation was facilitated by the firm’s efforts to demonstrate its capacity to meet the consumer’s quality needs.  The media was influenced by how the people viewed various aspects influencing the future of the firm and its brand. The results indicate that content about all the themes was published in the media between 2011 and 2014 with some years having more content about one or more themes. Toyota is improving the quality of its products to avoid future disasters where the customers’ safety is at risk.

Based on these findings the research decided to study public perceptions of Toyota.

Survey Findings

            The goal of the survey was to collect objective quantitative data to establish the participants’ opinion regarding the Toyota brand, crisis, and strategy. People affected by the crisis have important perceptions about the issue and the strategies that Toyota’s management adopted to address it. Therefore, the researcher used a questionnaire with 15 questions related to participants’ opinion of Toyota brand, crisis, and strategy. The survey included an online survey and face-to-face survey. The sampling frame included both American (47.5%) and Chinese (49.5%). In this regard, it was necessary to categorize the American and Chinese groups based on cultural differences. On this note, the questions sought opinions regarding Toyota cars and trucks among Americans and Chinese nationals. The group that participated in the online survey was young group mostly because of their technological orientation. However, it was important to subject the adults and elderly category into a face-to-face survey. The distribution of questionnaire mainly occurred through email and face-to-face. As the questionnaire is about Toyota, the target public for participate should at least have a car or know something about the car. The parking lots might be a good choice to reach the target public.  People who refused to participate in the questionnaire because of their tight work schedules that limited their time for such a survey. Most of them would ignore the email or message directly.  

Survey Results

Descriptives

            A sample of 96 people participated in the survey including an online survey and paper survey. Forty-seven respondents were Americans and forty-nine were Chinese. Respondents’ age ranged from 18 to 60 years of age. Over 60% of the respondents indicated that their friends influenced them to purchase cars. Among the respondents, 9.5% of respondents would like to spend less than $10.000 dollar on buying a car, 27% of respondents were willing to spend around $10.000 to $20.000 dollar on a car, 20.4% of respondents would spend about $20.000 to $30.000 on a car, and 15.3% of respondents would spend over $30.000 on a car. Among these participants, 15.3% of respondents’ cars have been recalled.

          RQ1 sought a helpful strategy for Toyota Company to restore the image after the recall crisis. The best strategy for Toyota Company in restoring the image after the recall crisis among the Chinese customers includes conducting effective research regarding their needs and perceptions in the market. According to the survey, it appears that the first important factor in the decision to buy a car was quality and safety (48.2%). The respondents had lower agreement on the Toyota company was with high technology and innovation. The strategy should focus on demonstration of high-quality and high-technology.

In the survey, there are five different strategies options, including Training the personnel for quality assurance, introducing more fuel-efficient cars, more customer-oriented products and services, more global strategy and manufacturing of more eco-friendly cars. There were 49.6% of respondents choose the strategy of training the personnel for quality assurance, which related to the first important factor in the decision to buy a car was quality and safety (50%). It shows that the consumers were more concerned about safety and quality in the first place. As a result, the Toyota Company should mainly focus on how to demonstrate technical progress to ensure quality issue. Besides, the strategy of more customer-oriented products and services was the second most popular option. The survey showed the respondents did not have an enjoyable shopping experience about low efficiency (M = 3.29, SD = 1.49) and uncomfortable waiting area (M = 3.62, SD = 1.30) in Toyota’s local dealer in the community. As a result, the Toyota company should improve the service in the Toyota’s local dealer to provide consumers or potential consumers a high-quality and efficient consumption experience, so as to rebuild the brand image.

          RQ2 asked about how culture affects the crisis communication strategy of Toyota. Culture played a critical role in crisis communication strategy of Toyota since it determined the perceptions of both the American and Chinese populations. The American culture is more power-oriented than Chinese culture. Therefore, they consider the influence of the crisis on power status. In this regard, their decision to offer an apology was enough to restore the image of Toyota in their market. However, the Chinese culture causes the members to find reason behind everything in society. On this note, they needed the company to conduct an effective research and communicate to them a reasonable finding to convince them to change their minds regarding Toyota Company in the market.

According to the findings, there are 69.4% respondents who think that the company should apologize first when dealing with the crisis, while the rest think the company should research first. Among these American respondents, 83.77% respondents think that the company should apologize first, while only 55.8% Chinese respondents agree with research option. The rest of Chinese (44.2%) think the company should research first. The best strategy for Toyota Company in restoring the image after the recall crisis among the Chinese customers includes conducting an effective research regarding their needs and perceptions in the market. Chinese subjects noted that a proper research was necessary for the restoration of Toyota Company image in their market because they like to focus on more realistic approaches to problems so as to reduce uncertainty. On the other hand, the American subjects believe that it was important for the Toyota Company to make a public apology to their customers in the American market to win back their confidence in the brand. In this case, the power mentality of the Americans causes them to think about Toyota’s recovery strategy as issuing an apology to their population in the  market.

         The American concentrates on power domination and the exercise of influence in society. In this case, the American consumers responded by demanding a public apology from the Toyota Company during the recall. The aim of the apology was to restore their power and feeling of dominance and importance in society. However, the Chinese culture concentrates on reason. Therefore, Chinese customer’s response to the recall focused on demanding a well-researched finding of the cause of the recall. Their rationality caused them to demand reasonable facts that contributed to the recall of the vehicles.

          Different strategies would receive a different response. RQ3 inquired about different public response related to different cultural background. Toyota took measures to recover from the catastrophe by applying different strategies to meet the needs of its regional consumers (Zhao & Flynn, 2013). The strategies used by the firm and the performance of the brand before the crisis affected how the brand’s name recovered among consumers and employees from different cultures. The similarities and differences in the opinion of individuals from various cultures could affect the financial performance of the firm at the regional level (Heller & Darling, 2012).

Respondents agreed that the different cultural background will influence people’s opinion of the Toyota recall crisis (M = 2.09, SD = 0.81). Besides, they strongly agreed that the employees working with a global company should respect diversity (M = 1.84, SD = 0.87).

As table 1 and table 2 shows both American respondents and Chinese respondents maintained lower agreement on the statement of Toyota handled the recall crisis well, and I believe that Toyota will not experience a crisis in the future. However, American respondents more agreed that Toyota will regain its image in the industry (M = 2.37, SD = 0.84) than Chinese respondents (M = 2.46, SD = 0.80), which is related to that American respondents more agreed (M = 2.30, SD = 0.76) that Toyota’s strategy works after recall crisis than Chinese respondents (M = 2.58, SD = 0.76). It illustrates that American have better impressions and expectations of Toyota than Chinese among respondents. As a result, different strategies need to be applied due to the different cultural background, while different strategies would lead to different public responses. It is difficult to distinguish between different cultures or different strategies resulted in different responses.

Table 1

 

Chinese Respondent Perceptions of Toyota Brand

                                                                     Mean                       SD

I think Toyota’s strategy works after the recall crisis                       2.58                   0.76

Toyota will regain its respected image in the industry                     2.46                    0.80

My attitude to the Toyota brand did not change after crisis             2.60                    1.07

Toyota handled the recall crisis well                                                2.81                    0.93

I believe that Toyota will not experience a crisis in the future         3.02                    0.99

Scale: 1 = Strongly agree and 5 = Strongly disagree

 

Table 2

American Respondent Perceptions of Toyota Brand

                                                                     Mean                       SD

I think Toyota’s strategy works after the recall crisis                       2.30                   0.76

Toyota will regain its respected image in the industry                     2.37                   0.84

My attitude to the Toyota brand did not change after crisis             2.22                   1.05

Toyota handled the recall crisis well                                                2.72                    0.70

I believe that Toyota will not experience crisis in the future           3.06                    1.05

Scale: 1 = Strongly agree and 5 = Strongly disagree

            The survey provided significant findings regarding the Chinese and American participants’ perceptions of the Toyota crisis and the strategy the management used to address it. The results of the survey include the responses from all the 96 participants. The two tables show the mean and standard deviation across the survey questions, depending on the subjects’ responses. The study results form the basis for the discussion in the following section.

Discussion

According to the results, Toyota used a variety of strategies to respond to the crisis.

Based on the literature review and survey, it was clear that the cultural differences between the Chinese and American respondents determined the type of communication strategy that they expected from the Toyota Company after the recall crisis. In this case, the Americans perceived that an apology was appropriate while the Chinese thought a thorough market research was vital for the company to achieve effective restoration. These perceptions are similar to Hofstede’s (2001) cultural dimension theory that explains why different cultures react differently to the crisis and the communication strategy used by the company to address it. In this case, the Americans preferred the power distance index (PDI) measures which determine the distance between societies with different cultures. It considers the proximity of the members of culture from different power statuses and their willingness to recognize the distance (Hofstede, 2001). As a result, this explains why the American population preferred an apology strategy because of their economic power status.

On the other hand, the perception of the Chinese people depended on highly concrete measures such market research. These perceptions are similar to the discussion by Xiumei and Jinying (2011). According to the authors, the two countries would differ in the way they responded to the Toyota crisis and the communication efforts to address it. The Chinese would be more accepting of visible efforts to address the issue, while Americans would be more skeptical because of the power distance index (Xiumei & Jinying, 2011).

Based on the survey findings, the research decided to conduct key informant interviews to understand better why Chinese and American respondents held such attitudes. The next section explores the qualitative data collection.

Qualitative Method

The key informants provided important data on why the Chinese and Americans held different opinions regarding the Toyota crisis and the recall. The Chinese informant revealed that people from the culture would like to receive honest information about the incident to prevent potential occurrence in the future. Hence, the Chinese participants preferred detailed research and investigation into the situation. They wanted to be assured that the company would not face such a challenge in the future.

On the other hand, the American informant suggested that people from the culture prefer to have the feeling of power when they encounter such a crisis. Their need for a sincere apology shows that they would like to have control over the situation. Compared to the Chinese, who would feel content by getting enough information about the crisis and solution, Americans would prefer knowing that the Toyota management team regrets the failure and is apologetic about its effect on consumers.

Public Relations Suggestions for Toyota

The public relations suggestion for Toyota will depend on the differences between the two markets. The management should understand the cultural aspects that affect communication in China and America. It should customize its communication to cultural needs. For Americans, the company should offer a sincere apology to maintain positive public relations with customers. Overall, Toyota should promote the perception of power among consumers (Xiumei & Jinying, 2011). They could use the media to send an apology to Americans and offer honest answers as part of the public relations for the Chinese market. Therefore, the management should analyze the crisis and the effects of the strategy to solve it. The information should be made public, especially for the Chinese segment. Generally, the firm should target its markets with relevant information to ensure continued positive relationships.

Conclusion

The cultural orientation of the Chinese and American consumers affects their reactions and actions in different types of crisis in the market. In the case of Toyota Company crisis that led to the recall of cars and trucks, the Chinese consumers adopted a different style of response from the one taken by the American consumers. According to the research, power and dominance are critical factors that affect the psychological orientation of American customers. For this reason, these consumers demand respect and restoration of their pride whenever companies offend them in the market. As a result, an apology from the Toyota Company was necessary to restore the image of the firm in the American market. However, the Chinese market was different since they focus on the rationality of the crisis in the market. In this regard, they required thorough market research from the company to feel convinced and change their perspective regarding the image of Toyota in the market. Their rational minds caused them to demand facts from Toyota Company explaining the contributing factors of the crisis that led to the recall of cars and trucks from the customers. Therefore, the cultural orientation of a given society affects how they react to market shocks and their perceptions of the image of the companies involved. Based on research and analysis of the annual report of Toyota and media reports from New York Times, most articles are mainly related to the Theme2 Production Efficiency, which is the topic the public most concerned about according to the survey result. In the United States, Toyota was launching a targeted strategic approach based on public demand.

 

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