Wednesday, February 3, 2010

The Rise and Fall of Toyota

How long does it take for the world's most successful auto company to fall? About a week or so.

On January 21, 2010, Japan-based Toyota began experiencing one of the worst public relations crises that the auto industry has seen when they officially recalled over 2 million vehicles including the Camry, Corolla, and RAV4 models.

Apparently, many of the vehicles are having problems with braking.

The bad PR immediately began effecting Toyota's reputation and revenue, as U.S. sales slumped 15.8 percent in the company's poorest January performance in 11 years.

Even worse, only 15,792 units of the Camry were sold in January 2010, down 55 percent from January 2009 and down 24 percent for the current year.

Meanwhile, rivals General Motors and Ford have decided to capitalize on the opportunity. Both have been offering $1,000 incentives to drivers who trade in their Toyotas for a new car.

So what does all this mean?

Well, it means that you can't be number one forever and that no matter how successful you are in business - you will eventually experience a disastrous situation.

It also means that this is a prime opportunity for American auto companies to regain market share, create more jobs, and help rebuild the economy.

However, Toyota is an experienced and intelligent company who is bound to make a recovery from all this. Yes, they screwed up big - but they'll bounce back. They'll have to ride the wave of bad PR for a couple of months, and then work on rebuilding their brand.

Sadly, though, it took only a week for them to fall - but will likely take a few years for them to rise to the top again.


  1. I feel...robbed! Except for my dad who is a Benz man, I come from a long Toyota linage. Crazy. Went to rent a car last week. Normally get a Corolla, but they didn't have any so the clerk offered to upgrade to a Camry at no additional charge b/c of the recall. I went with a Yaris and hated the ride! Man I sure hope they don't screw up the Lexus too. I was looking to upgrade my '99....May the force be with you Yota! LOL

  2. Dante, thanks for the insight. Toyota's troubles are also an example of the fickle nature of consumer perceptions that become reality.

    For years, American automakers complained of current poor quality perceptions that originated from the realities of the 70's and 80's. Those poor decisions continued to impact their ability to sell effectively in the 90's and beyond when quality was equal or even better than the imports. Many Americans viewed (and still view) domestic vehicles built by GM or Ford as inferior and Toyota was able to capitalize on those perceptions while affirming their own quality with solid products.

    While I'm sure that they have controlled the problem and implemented an effective solution, being #1 has its disadvantages. They are a target of their own success and, as you've expressed so well in your post, it's easy to undo years of goodwill and positive press with a brief period of highly visible, negative activity no matter how good your intentions or your reputation.

    The lesson for entrepreneurs: always manage your brand in the most positive manner to build positive social capital; when bad things happen, act quickly and decisively and expect to exhaust your positive reserves; get back in the game quickly and do whatever it takes to restore confidence in your products and services. Better yet, stay on top of your game so that you anticipate big risks and can mitigate irreparable damage before it happens.