Toyota Motor Corporation (TMC) became the world’s largest vehicle manufacturer in 2008, offering a full range of models from mini-vehicles to large trucks. Toyota and its luxury line, Lexus, have been among the top automotive brands in terms of reliability, quality and long-term durability. Toyota had also until recently been one of the most profitable carmakers: in the financial year that ended in March 2007, for example, the company made a profit of $13.7 billion while General Motors (GM) and Ford reported losses of $1.97 billion and $12.61 billion respectively. But its fortune has recently turned. In January 2010 the company announced that it would temporarily shut down production at six assembly plants in North America and suspend sales of its most popular models, including the Camry, the best-selling car in the United States. The week before the company had already recalled 2.3 million vehicles with faults in the accelerator pedals. These announcements have come after a series of product recalls that have seriously damaged the carmaker’s reputation for producing good quality, reliable cars at reasonable prices.

The company’s pursuit of volume may have undermined its previously enviable record for reliability. In 2006, after another series of recalls, the company promised a ‘customer first’ strategy to restore its slipping reputation. But recalls continued and Toyota slid behind other carmakers in customer reliability polls. These troubles and the damage to its reputation have made customers wary of buying a Toyota. In addition, Toyota’s initial leadership on sustainability including the development of electric and hybrid cars is quickly eroding as other big carmakers are launching their own green models and are integrating sustainability issues into their production and supply chains. Toyota however had been among the first to recognize the significance of environmental sustainability for the car industry, and the company has over the years taken many initiatives to earn an environmentally friendly image. Fujio Cho, a former president of Toyota, said ‘Environmentally friendly cars will soon cease to be an option, they will become a necessity.’ Toyota, for example, came out in 2005 with its Fourth Environmental Action Plan. Acting as a blueprint for Toyota’s contribution to the environment, the plan outlines the activities that Toyota needs to undertake to sustain an environment-friendly corporate image. It includes enhancements in fuel efficiency and reduction in the CO2 emission from vehicles. Through the adoption of superior environmental technologies, Toyota plans to reduce CO2 emission from its own vehicles by 15 per cent. The company also believed that the introduction of the Toyota Prius (the world’s first passenger vehicle based on a hybrid engine) has given it a ‘green reputation’. Fujio Cho commented in 2002 that: ‘hybrids like the Prius are a starting point to address long-term environmental issues. Automakers that deliver practical, greener products will command the market in the 21st century.’

A strategic vision

Toyota’s overall vision is to ‘zeronize’ and ‘maximize’. ‘Zeronize’ symbolizes the company’s efforts in minimizing the negative aspects of cars, such as environmental impact, traffic congestion and traffic accidents. ‘Maximize’ refers to efforts in maximizing the positive aspects of cars such as comfort and convenience. Toyota is striving to combine the two by creating ecologically superior but safe and reliable cars. In 2007, Katsuaki Watanabe, Toyota’s president at the time, articulated the challenge to the car industry in terms of ‘the increasing demand for corporate social responsibility [and] to take on global environmental problems such as global warming, depletion of natural resources and air pollution’. Watanabe also articulated the leadership position that Toyota had taken on environmental issues in the car industry. He specifically referred to hybrid technologies as an example of Toyota’s environmental leadership: ‘Toyota has positioned hybrid technologies as core technologies and will develop them with a commitment to leading the way in that field’. In recent years, however, Toyota’s edge and leadership on environmental issues has been challenged by other carmakers, notably Volkswagen and BMW. The current President of Toyota, Akio Toyoda, believes that the company needs to be more ruthless in exploiting its early leadership in commercializing hybrid systems and electric-vehicle technology. He is convinced that Toyota is still ahead of the pack; although other carmakers are launching hybrids and electricity-powered vehicles, Toyota will be able to exploit its leadership on a much larger scale by bringing a hybrid version of every car Toyota makes onto the market and by extending the Prius brand to cover a range of innovative low- and zero-emission vehicles.

Challenges ahead

One of the main challenges ahead for Toyota is its faltering reputation in producing safe, reliable cars at affordable prices. Recent customer polls and market surveys put Toyota clearly behind its competitors. For example, Ford vehicles, long considered as also-rans, are now showing ‘world-class reliability’ beating the Toyota Camry in the segment of mid-size cars. If Toyota can no longer rely on its superior quality and reliability to appeal to customers, its vehicles will inevitably be judged increasingly on more emotional criteria, such as its design and styling, and the experience of driving a Toyota car. But this is not an area that has traditionally been Toyota’s strength, nor has the company been consistently communicating such experiential or emotional benefits to its consumers. The company therefore finds itself in a bit of a dilemma. Mr Toyoda, the current President, believes that the company needs to return to its strengths (reliability) as well as add new spice to its cars. In October 2009, Toyoda addressed an audience of Japanese journalists and said that the company was in a spiral of decline, unless it would reinvent itself. Mr Toyoda had been reading How the Mighty Fall, a book on how previously mighty companies may step into a cycle of decline. The decline leads to a downward spiral triggered by an undisciplined pursuit of growth and by being out of touch with the changing values and expectations of customers and other stakeholders. When Mr Toyoda took over in 2009, he immediately ordered a back-to-basics overhaul of product development across the firm’s global operations. He also has been challenging his company’s engineers to make less dull cars. At the Tokyo motor show in October 2009 he stated publicly: ‘I want to see Toyota build cars that are fun and exciting to drive.’ As Morizo, the alter ego under which he blogs, he went even a step further. In his blog, he commented on the cars at the show: ‘It was all green. But I wonder how many inspired people get excited. Eco-friendly cars are a prerequisite for the future, but there must be more than that.’ Mr Toyoda’s challenge lies in rebuilding and extending Toyota’s reputation from the initial dual focus on environmental leadership and the safety and reliability of its cars, to a reputation that stresses the emotional fun and enjoyment of driving Toyota cars. He may have to keep the company’s traditional strengths – the dependability and affordability of its cars – whilst adding the emotional benefits that customers now appear to demand.

Answer the following questions:

1. Consider the vision articulated by Toyota and its alignment with the company’s image with external stakeholders and the internal culture. Is there sufficient alignment between vision, culture and image? What gaps did emerge and how can Toyota address these gaps?

2. Consider the overall communication strategy of Toyota, including its strategic intent and positioning, the themed messages and message styles in Toyota’s communications. Given the challenges ahead for Toyota, how would you change the communication strategy in terms of strategic intent, themed messages and message styles?