The Toyota Recall Crisis:
Have Toyota’s crisis management decisions negatively
affected the global image of the brand.
Tom Bickley
06263760
This dissertation is submitted in part requirement for the Degree
of MA with Honours in Entrepreneurship at the University Of
Aberdeen, Scotland, and is solely the work of the above named
candidate. The work of other authors is recognised and
appropriately referenced.
Submitted:
Word count:
Acknowledgements
I would like to thank …
I would also like to thank all of the willing participants …
Table of Contents
Abstract
(200 words)
Chapter 1.1
Introduction
(225 words)
In January 2010, the world famous car manufacturer Toyota, was forced to recall
180,000 cars from the UK market, shortly followed by a 2.3million recall of various
models in the USA. Recalls in the automotive industry have been on the increase over
the last 20-30 years with consumers expecting a higher quality and more reliable
product. Governmental legislation and agency guidelines have also hindered the
automobile manufacturers with safety precautions being at an all time high. As a
result of this continuing increase, empirical research has been carried out to assess
how and why this has occurred; but also to understand how a company can manage
such crises.
There are studies into many avenues within this area of interest however there are few
contextual case studies. By using the theory provided in referenced academic
literature, with an emphasis on brand image, recognition, consumer loyalty and
purchase intentions - this study will analyse Toyota and their crisis management
techniques as well as the effect of their brand equity on their overall recovery.
Data has been collected from various credible online opinion polls, newspapers and
combined with current up to date Toyota press releases, will form the basis of the
study’s analysis of the public’s reaction – then analysed in order to create a model to
be used in order to analyse future brands during product recall crises.
1.2.1 Research Aims
Aim 1.
To understand the impact of product recall Toyota as a brand famed for
reliability.
Aim 2.
To assess the possibility of these recalls negatively affecting consumer
brand loyalty and purchase intentions.
Aim 3.
To critique the way Toyota handled their crisis and to assess whether
other techniques would have been more effective.
1.2.2 Research Questions
A.
What are the effects of recalls on the branding of Toyota?
B.
Have Toyota’s ‘crisis management techniques’ been successful?
1.2.3 Hypothesis
A.
Positive crisis management techniques will aid the brands recovery.
B.
The choice of crisis management techniques used will affect opinions
on consumer loyalty and futures purchase intentions.
C.
Toyota has strong brand equity; this will absorb a lot of the negative
impact created by a product recall.
D.
Media coverage of any recall will influence consumer purchase
intentions.
E.
Where brand loyalty will be questioned, substitutes will be sought.
F.
New ‘younger’ first time buyers may be put off buying Toyota.
1.3 Outline
-------------------------------------------------------------Chapter 2
Review of Existing Literature
Outline global recall situation – 100 (147)
Over a period of the last 30 years product recalls within the automobile industry have
increased dramatically. Over 29 million vehicles were recalled in the states alone
during 2004 (http://autonet.ca) increasing from the 2003 total of 19 million worldwide
(Power and Lundegaard, 2004). The consistent increase in the ‘phenomenon’ of
recalls in the automotive market has been the result of ‘fierce competition, as well as
the rapid development of technologies used in the industry.’ The major companies are
risking the possibility of model recalls in order to gain competitive advantage and
increase their R&D potential. The major manufacturers are relying on their brand
equity to hold strong in the eyes of their consumers during any possible recall issues.
Empirical research has been carried out to assess how and why recalls occur in the
automotive market; but also with an aim to understand how to manage such crises.
Unexplored avenues? – 100 (114)
According to both Souiden and Pons (2009) and Dawar (1998) there are still various
‘avenues’ regarding product recalls that have not been explored. Souiden and Pons
(2009) concluded that ‘current research did not consider the effect of media’ with
Siomkos (1999) associating the media as a key feature in the ‘perception of risk’.
These views will be expanded upon through analysing the media coverage of the
Toyota crisis to provide more of an insight into the relationship between
positive/negative consumer reactions. Overall, in order to better understand some of
these ‘unexplored avenues’ the paper will examine the situation Toyota have found
themselves in providing theory of product recall and an analysis of its effects.
Base to expand on aimed at Toyota – 100 (138)
Souiden and Pons (2009) conducted their study into the impact of product recall crisis
management and its effects on image, loyalty and purchase intentions. Their research
aimed ‘to clarify the type of recall strategies that companies offer, as well as their
impact on consumer behaviour.’
The research of Dawar (1998) focussed on ‘examining the impact of a firm’s actions
on brand equity.’ Dawar analysed various case studies and set a framework for
analysing the effectiveness or ineffectiveness of a company’s product-harm crises
management.
Using these two journals as an overall base for the study I will compliment them with
other papers focussing on crisis management and brand image/equity. Newspaper
articles and Toyota press releases will be referenced, in order to provide a more
detailed look at product recall crisis management of January 2010 and its effects on
Toyota.
Souiden & Pons (2009) – voluntary recall / involuntary / supeff / deny – 500 (539)
The Souiden and Pons (2009) study strongly links ‘the impact of automobile recalls
on consumer behaviour’ including a contextual insight into crisis management, a
company’s past and present reputation and the effects of the media. One of the main
considerations throughout is that whereby ‘the company affected by the recall has a
good reputation...the negative impact of recalls on purchase intentions is diminished.’
It is this statement that will be most useful throughout this research, linking company
reactions to recall crises and looking at the techniques they choose to combat them; as
well as their impact on brand image/awareness, consumer loyalty and their overall
purchase intentions.
A. Positive crisis management techniques will aid the brands recovery.
B. The choice of crisis management techniques used will affect opinions on
consumer loyalty and futures purchase intentions.
Souiden and pons base their initial hypothesis on the work of Siomkos and Kurtzbard
(1994) They came up with 4 categories for product recalls:
1.
Denying the defect (no recall)
2.
Involuntary recall
3.
Voluntary recall
4.
Super-Effort recall (improvement campaign)
Each of these categories is given a degree of impact on the image and reputation of
the company in question with varying levels of positive and negative results. Denying
a defect will always encourage a negative reaction to the brand and product, where a
company ‘refuses to shoulder their responsibilities’ they are not supporting the
consumer and their needs. Similarly they hypothesised that a forced or ‘involuntary’
recall, possibly imposed by a governmental agency, would have similar pejorative
connotations for the company.
On the contrary ‘voluntary recalls’ and ‘super-effort recalls’ have a positive
improving impact on the company. Siomkos and Kurtzbard (1994) and Kabak (1991)
all put forward and demonstrate this suggesting where a company ‘accept total
responsibility’ and give the impression that they are consistently striving ‘to offer safe
products’ that a consumer’s negative perception of a recall is lessened. Souiden and
Pons (2009) use the example of Chrysler, ‘in the 1990s they disconnected the
endometers from its new vehicles during factory tests,’ by publicly announcing this
fact/error before it was leaked by the press, by apologising for the mistake, Chrysler
were able to improve their public awareness of the quality and image with a 20%
increase in its brand capital. Proactive crisis management strategies are key to
ensuring brand safety, minimising the potential for loss both financially and where
brand recognition is concerned.
Shrivastava and Siomkos (1989) introduced the concept of ‘super-effort recalls,’ as
Souiden and Pons (2009) discuss, it is the idea that these recalls are not necessary
however a company will take it upon themselves to recall specific models for minor
non-hazardous defects. Jolly and Mowen (1984) have suggested that this is an
approach that can be used to reduce the feeling of ‘danger’ often implied during
recalls.
Despite all of these possible techniques to reduce the effects of recalls, Souiden and
Pons (2009) hypothesise that the initial and established brand image is still important
in relation to the consumers’ perceptions of the company. A strong brand will have a
positive effect on consumer purchase intentions as well as brand loyalty, even during
a mass product recall; however this will be more positive if the recall is ‘voluntary’ or
‘super-effort.’
C. Toyota has strong brand equity; this will absorb a lot of the negative impact
created by a product recall.
Dawar (1998) signalling / investment / prior experience – 500 (545)
Dawar (1998) focuses on the affects that product-harm crises can have on brand
image as well as the effects of corporate signalling on the average consumer. Using
major examples such as Coca-Cola, Dawar defines brand image as an ‘intangible
equity’ suggesting that it is the brand image itself that will allow for and aid recovery
from a product crisis. Brand equity is defined as ‘awareness, credibility and the
positive associations consumers attribute to the brand’ by Aaker (1991) using this
statement Dawar is referring to the idea of a strong brand will push a company
through a crisis, for example a recall, to ‘safety.’
The consumer is key in the perception of a company; Keller (1993) suggests that
‘perhaps a firm’s most valuable asset for improving marketing productivity is the
knowledge that has been created about the brand in consumers’ minds from the firm’s
investment in previous marketing programs.’ Despite these conclusions on consumer
perceptions Dawar states that ‘little work has examined the impact of corporate
actions on brand equity’ however Aaker and Jacobson (1994) believe that ‘corporate
investments in perceived quality’ issues will strengthen brand equity, this will be
investigated further in this paper.
‘Brand equity can potentially be devastated by publicity surrounding instances of
defective or dangerous products termed product-harm crises.’ Dawar backs up this
statement by suggesting that recalls etc have been increasing as a result of the
‘increasing complexity of products and ever demanding customers’ (Birch 1994) The
idea of ‘devastation’ to a brands image is often considered a result of the media’s
coverage of any crisis, ‘publicity about products...directly affect brand associations
and potentially equity.’ Toyota were subjected to mass media coverage and this
created more of a problem than would have occurred had they controlled what
information was released and how they went about ensuring trust amongst their
existing and potential customer base.
D. Media coverage of any recall will influence consumer purchase intentions.
Trust in a brand is built up over a period of time and relies on the consumer’s brand
recognition and the media coverage of the company. ‘The credibility of a brand in
signalling a market position is based on two factors: (1) previous investments by the
firm in that market position, and (2) consumers’ prior experience with the brand,’ says
Dawar (1998) implying that it is the actions of a company before a crisis and the
preparation leading up to such problems, that will affect their ability to continue in
their established market position.
Dawar also discusses public relation concepts, relative to the research of Hearit
(1994) whereby he prescribes that ‘immediate and unambiguous action’ must be taken
in order to reduce damage to brand image during a product recall crisis. A delay in
this can turn into a crisis where an involuntary recall is forced by government or
official agencies which will in turn ensure consumers view the company in a negative
light. As Dawar states, it is brand signals that will change the consumer perceptions
however he also states that despite implying certain facts to consumers, that they are
‘often unaware of product quality and the characteristics of the firm.’ This can be
manipulated before and during recall crises in order to strengthen the branding and to
improve trust between firms and consumers.
Lantieri & Chiagouris (2009) equity / trust / quality - 500
Lantieri and Chiagouris (2009) aimed to ‘identify the influences of mistrust and
recommend actions that managers can take to insulate their brands climate of
mistrust.’ The study focuses on the concept of eight themes that have increased the
mistrust amongst consumers. There are two themes that relate most to the Toyota
study:
a) Theme 1: The Cynical Consumer - Lantieri and Chiagouris (2009) suggest that
‘perhaps the most powerful reason for a decline in trust is that consumers view brands
with a much more cynical eye than they did 25 years ago.’ The consumer is
impowered in this modern day society with more information and data at their
fingertips than ever before. With the impact of online forums and consumer polls,
everyone is exposed to both the negative and positive aspects of certain brands and
their products. The purchase intentions of consumers are moulded from everyday
occurrences and experiences as well as word of mouth but it is the media that can
ultimately influence a consumer for or against a company. Where consumers have
‘the ability to quickly ‘google’ a brand or retailer’ they also have the ability to find
consumer opinions from both sides of viewpoint. They state that ‘dissatisfied
consumers tell more people about their situation than satisfied consumers’ implying
that there will be less positive influential data on the internet than negative –
‘consumers expect to be disappointed’.
b) Theme 2: Recalls – Lantieri and Chiagouris (2009) begin their second theme with a
familiar concept that can be found in many of the current academic papers, the idea
that consumer expectations of quality and availability have increased tremendously
over the last few decades. ‘Many of our products today are superior to those of the
past, the recall phenomena has lead to lower levels of trusts in brands’ – it is the trust
in company brands that suffers at the hands of recall phenomena, quality is brought
into question with reliability and credibility scrutinised by each current and potential
customer.
All the way through the study, Lantieri and Chiagouris (2009) focus specifically on
the effects of ‘trust’ on a company, with consumer awareness being a major
consideration. The internet and legislations on quality control and safety have brought
‘trust’ to the forefront of consumers purchase intentions, more so than in the past
putting more pressure on companies to perform and deliver consistently. Solutions
wise, Lantieri and Chiagouris (2009) suggest that there are several possible
improvements to be made that can increase ‘trust’ or reduce the ‘mistrust’ consumers
observe. If a company can ‘simplify the complaints procedure, reduce automated
systems and reward consumer loyalty’ the results should improve their brand image to
consumers especially in relation to brand-consumer relations.
Grabowski & Hertzberg (2007) quality / avoiding recalls – 200 (207)
Grabowski and Hertzberg (2007) put together a guide to ‘avoid product recalls.’ They
address issues such as ‘are your customers safe? How well are you prepared for a
recall? What impact will this have on our future?’ suggesting that resolutions to these
questions will aid the recovery of your brand if a recall crisis occurs.
Grabowski and Hertzberg (2007) imply throughout that preparation is key to the
development and survival of a brand during a recall, without such groundwork the
company would seriously suffer. ‘Proactive companies are assembling the necessary
resources to develop product recall prevention initiatives well before a potential crisis
occurs.’ They also discuss a company’s spokesperson and how important they can be
in recall situations, this links back to the Souiden and Pons (2009) data whereby it
was important for the type of recall to be correctly conveyed by the company involved.
By not conveying the correct information the brand is opening itself up to potential
negative connotations and as such may influence the purchase intentions of
consumers. When there are questions surrounding the reliability and credibility of the
brand and its product prospective new substitutes can be sought out by new
consumers.
E. Where brand loyalty will be questioned, substitutes will be sought.
Keller (2001) equity / responses / relationships - 500
Compile everything together with Toyota news? Lead on to research design
(2500 words)
Chapter 3
Research Design
3.1 Data Collection Method
3.1.1 Strengths of questionnaires as a data collection method
3.1.2 Weaknesses of data collection method
3.2 Survey Sample
3.3 Ethical Issues
3.4 Data Analysis Technique
3.4.1 Research Data Validity
3.4.2 Research Reliability
3.4.3 Research Generalisablity
(1500 words)
Chapter 4
Results
Hypothesis A.
Hypothesis B.
Hypothesis C.
Hypothesis D.
Hypothesis E.
(2000 words)
Chapter 5
Discussion
(2000 words)
Chapter 6
Conclusions and Recommendations
6.1 Conclusion
6.2 Recommendations for Future Research
(1000 words)
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