Business ethics are essential in guiding the decision-makings process and the process to be implemented in the firm. Due to its significant effect on the business process and economic outcomes all private and public corporation operation in the local and international environment, the issue of ethics is one of the organization principles. The practice pertains to how shareholders, stakeholders relate to the firm, customer satisfaction, product quality and social responsibility. As such, business ethics act as a prerequisite and a pivot for all businesses (Ferrell & Fraedrich, 2015). According to Ford & Richardson (2013), companies, ethical concerns have improved but yet to meet expectations due to the globalization of business environment and pressure from international stakeholders. Toyota’s ethical issues can be traced from the recall of its products that affected its market and prosperity from the last decade.
Business ethics are essential in guiding the decision-makings process and the actions taken by the organization. The issue pertains to how shareholders, stakeholders relate to the firm, customer satisfaction, product quality and social responsibility. As such, business ethics act as a prerequisite and a pivot for all businesses (Ferrell & Fraedrich, 2015). According to Ford & Richardson (2013), organizations have improved the bussines ethics but still falls below expectations. This is due to the globalization of business environment and pressure from international stakeholders. Toyota’s ethical issues can be traced from the recall of its products that affected its market and prosperity from the last decade.
The origin of Toyota’s is traced back in Japanese weaving industry during the end of the First World War in 1918. Toyoda was the first one to invent the first automatic loom that encouraged him to think of producing a vehicle Production System mainly used today. The invention of the loom impressed an investor from Britain who acquired the production and sales rights. The proceeds were used to develop an automotive technology at the former Toyoda. Eventually, this led to the launch of the passenger years later in 1936 known as the Model AA. In the following year in 1937, Toyota Motor Company was started. From the launch of the first car in Japan to 1958, all the parts of the vehicle were produced in the country, but in 1959, the company began production of Brazil with the formation of its manufacturing subsidiaries and another affiliate in the country (Ohno, 1982).
Risks in the organizations increases the level of uncertainty, reduces revenue and employee turnouts. As a result, many firms focus more energy more exploring the exiting threats and addressing them before they affect the business process of the organization (Bowen & Zheng, 2015). The ability of the management to deal with the risks is essential to the company as it makes them approach the market with high level of confidentiality and high level on how the final decisions are made. For example, when the organization acquires knowledge on the risks affecting the business process, they develop many strategies on how to deal with potential problems (Stephan, 2016).
There are many issues related to the ethics that are seen in many of the other firms. Toyota has revealed their lack in the ethical decision making concerning the present sticking accelerator issues along with the vehicles. In order to have the desired profits, the use of the faulty products should not be used as it hampers the brand image of the firm (Heizer et al., 2013). The steps taken by Toyota in order to maximize their respective profits have resulted in many injuries to the people concerned and a few deaths. Therefore, these issues need to be reduced in order to increase the overall performance of the firm.
The globalization of market and change in industries practices has changed the way companies conduct businesses particularly the manufacture of the product and provision of services. The old model of business did not take into consideration the ethics and this makes it not feasible in the modern bussines environment (Ferrell and Fraedrich, 2015). Currently the failure by companies to take into consideration the ethical issues has ruined the company market and financial collapse. The focus on making profits by some corporation has resulted in production of substandard goods and services and the effect is manmade natural disasters (Hong & Snell, 2015).
At the beginning of the decade, Toyota issued hundreds of recalls for a variety of its brand models with problems of accelerator system default. The event and the subsequent controversy surrounding the mechanic or electronic failure go back to 2007 (Heizer & Barry, 2013). In that year, Toyota Tundra model of trucks had accelerator glitches. Besides, in the same year, the Lexus model was found to have defective mats. The defects surfaced up in August 2009 as a result of a car crash that led to the death of a family of four. Before the incidences happened, the accelerator of the Lexus ES 350, which they were driving, was stuck under the mat (Tennert, 2014).
From the last decade through this decade, the effect of ethical decision making on the issues of sticky accelerator pedal has affected the reputation of the corporation (Kumar & Schmitz, 2011). In the modern business environment, it is apparent how companies like Toyota reacted to the crisis caused by their product in a bid to maintain its reputation as one of the best quality producer of automotive for the international market. The literature review explores the ethical dilemma that faced Toyota Motor Corporation in which the management compromised the reputation due to mechanical mistake. Several benefits ascribe to being ethical and practicing social responsibility (Drumwright & Murphy, 2014).
Conclusion
In conclusion, there are five issues that affect the company in relation to acceleration problem caused by the break system and the subsequent deaths caused by such. These issues include the risk management in the organization, bussines ethics, substandard manufacturing practices, communication problems, and ethical decision-making process in the organization. These issues require solution because the affect organization image in the market, profitability, dissemination of information to the stakeholders and other issues. Some of the benefits of solving the issues is to avoid consumer loss in the future and the possibility of collapse and loss of competitive abilty to companies like general motors, Hyundai and others.
According to Ferrell & Fraedrich (2015), the term ethics is used to describe the moral judgments regarding what falls within the acceptable and unacceptable range. In the organization, the meaning may be slightly different, and the ethics formed by the management underpins the decisions made in the business. In the context of local and international trade, the concept implies the school of thought that guides the decision-making process and firm’s policies and informs the management and the team what is right or wrong in the context of the business environment the organization is operating. Ethics has everything to do with both the stakeholders and the shareholders and employees (Drumwright & Murphy, 2014). When corporations are following the environmental and company standards there are increased customer satisfaction, social responsibility and improved qualities of the product. It is essential to note firm’s executive whose decisions are based on the wealth for shareholders and reputations are unable to follow ethics (Carroll & Buchholtz, 2014). This is the case for Toyota because its focus was to expand its global market and outshine the businesses rivals namely the general motors.
The risks affecting the organization business processes originate from external and internal sources of the firm. The external risks include those that the management has no direct control. The factors include exchange rates, political issues, and others. On the other hand, inherent risks occur due to management non-compliance and information breaches among others (Chukwu & Nworgu, 2017). Firms like Toyota have realized the damages caused by unseen risks and therefore identified a dedicated team aimed at identifying risks and formulating strategies to respond to the risks. Toyota faces multiple threats from myriads of sources and therefore need sophisticated strategies (Heller & Darling, 2012).
The identification of the risk management strategies is of great importance as it generates direct impact on the execution of the business processes of the firm (Shin et al., 2014). The use of the latest technologies to cope up with the utilization of these technologies has significantly increased the risk for the firm. Poor risk management strategies are seen to affect the business processes adversely and therefore, Toyota needs to recognize this as to enhance its overall performance. Toyota is a big company with global demand for its services and product. The bigger the company is, the probability of high risk in the process of interacting with the suppliers and the consumers. Thus, many risks exist in the supply chain management (Heller & Darling, 2012).
Toyota and other companies in the industries are vulnerable to myriads of risks because the leadership of the firm is not accountable enough, opaque supply chain and the process of procurement fails to take advantage of functional leadership. Therefore, Toyota management needs to take necessary steps to ensure full accountability identification of the risk in the supply chain and the process of preventing such (Chikudate, 2014). As a response, the risk management team in the company is responsible for evaluating the possible threats in the environment and determining the critical plans for the business. These significant risks have an adverse influence on the organization performance and thus given priority. The aim of the team is to ensure the enterprise only deals with those affecting the core objectives while controlling others (Booth, 2015).
To this regard, Toyota has put into place various risk management plan and team to deal with issues that may affect its business processes. One of the strategies includes standardization of particular vehicle parts to all automakers in the country and more specifically those who threaten the revenue of the company and disrupt the process of production. What the company has done is to identify and examine the likely threats in the supply chain and dealing with disruption. The second aspect includes exerting influence on lower-tier suppliers to keep and provide a safety stock, which cannot be standardized. The aim of the strategy is to reduce the possibility of shortages of some parts such as microchip controller units (MCU’s). Other companies also produce these parts but face problem of production and supply of the essential components (Chikudate, 2014).
The strategy is important in a situation where the company production capacity is disrupted in the event of a natural calamity like an earthquake. However, the primary concern regarding the strategy is where to store the safety stock and whether the suppliers would be compensated for the same. The third and the last component include supply chain strategic and political implications of the strategy. The best approach that can be used by the company is ensuring that each geographic region to have an independent supplier to avoid a scenario where the production and distribution of all parts can be affected (Booth, 2015).
The takeaway from the case study is that the business’s rapid strategic expansion and market growth must be equally met with mitigation strategies and risk management. It is unethical to occasion growth of the company and allowing greed to drive the firm’s priorities. Toyota management had a good strategy of expanding the business, but such did not incorporate the principles of the corporation culture, which would have allowed market growth and expansion, but with increased vigilance. There is a need for rigorous inspection of the quality and safety of all the system and component in the vehicle and those produced by their suppliers (Monden, 2011).
Therefore, it important that conversations and strategies tailored for growth and continued market dominance be accompanied by improved standards of quality which Toyota failed to understand and accomplish. One can conclude that the whole scenario is a prove of ethical failure on the part of Toyota Motor Corporation and leniency of upholding the external reputation and internal standards as one of reliable and safe provider vehicles to global consumers.
According to Bowen & Zheng (2015), the origin of the ethical problem does not only emanate from the defective accelerator that caused death, but it also involves the behaviors of the Toyota’s management after the recall. For instance, the corporation did not have initiatives to deal with the issues because of the drive to make more profit at the expense of improving the image. The administration did not respond promptly. The firm first argued the issues was due to the floor mats but not defective vehicles parts. However, in time the issues could not be covered anymore as questions began to emerge and deaths reported. The decision was unethical because the focus was directed to protecting the interest and the image of the corporation and did not consider a recall of the defective vehicles.
Ethics are critical to companies as it comes with many business benefits that make increases the ability to attract potential employees, investors and customers (Carroll & Buchholtz, 2014). Investors are comfortable to put the money in a company they think will utilize the moral ethics in conducting business. Employees have comfort of knowing the ethics of the organization and the actions that fall in the right or wrong directions. The consumers, on the other hand, will buy goods from a team, which they are aware or believe the source of raw materials used and labour is acquired ethically (Rothaermel, 2015).
Besides, firms that set and follow own ethical guidelines are at less risk of being fined due to poor ethics. For example, the corporation can be fined, the directors, employees and this means loss of revenue by industry regulators or the court of law (Rothaermel, 2015). MacDonald & Hartman, (2014) argues that Toyota is one of the multinational organizations that have experienced such cases due to unethical practices in the production of products and services, and this affected the customer’s perception of its products in the market. It is important to note that the reputation of a company enhances or reduces its sustainability and market competitiveness. This is because the trust and the confidence of shareholders and stakeholders have profound and direct effect on its bottom line (Kumar & Schmitz, 2011).
This was evident when the family appeared in the U.S. Congressional for a hearing regarding the company because the members insisted that electronic throttle did not compromise the safety of the and instead blamed pedal suppliers (Stier, 2016). After appearing in the congressional hearing, the management conducted the test on the weak system, but the evidence was not acknowledged. An analysis of such events reveals that Toyota’s management deliberately refused to release the necessary information. The reputation of the company was prioritized when the company knowing well of problem reduced the range of recall (Booth, 2015).
According to Kantianism model of ethics, the corporation reaction to the issue of the faulty brake system would have been addressed immediately after noticing the complaints because it within the ethics of doing bussines that of the consumers. Therefore, slow disclosure of the issues does not conform to Kantianism belief that advocates for addressing the concerns for the grater goal of the organization. The issues are not about delaying the recall but also continuing to move the vehicles to the market when still aware of the safety concerns of the consumers and the responsibility they had. If the Maxim to increase the market share was driven by ethical concerns rather than profit making, then many lives lost during clashes would not have occurred.
Toyota’s approach showed the collapse of ethical values that guide the firm’s operations and irresponsibility on the part of the management to take a right path to deal with the problem. To a larger extent, the turns of events reveal a blunder in the decision-making process and disregard for business ethics. In the end, the market share was severely affected, the company suffered consumer confidence crisis globally, hefty fines due to ethical dilemma but not due to quality problems of the pedal system (Stier, 2016).
Toyota is one of the biggest Automobile manufacturers of the automobiles throughout the different parts of the world (Heizer & Barry, 2013). It is a Japanese company which was founded in the year 1937 and engages the best quality of the design, manufacture, and assembling of the cars for the concerned customers. The company is entering into different market segments, and the firm has established its brand name by working as per the satisfaction of the customers (Albino et al., 2016). It has become the eighth largest company in the world, and the focus of the team has been to deliver the latest design of cars throughout diverse market segments.
It has been seen that the firm has placed their respective profits over ethical issues and the concerned substandard practices have been the cause for several thousand of accidents, injuries along with deaths in many of the cases. The lack in the ethical decision-making has significantly affected the execution of the business processes (Koopman, 2014) and has also lowered the confidence of the consumers regarding the purchase of the cars. There exists crucial requirement to maintain the ethics as per the reliability of the users as this helps in evaluating the growth and the desired business of the firm throughout the targeted market areas.
However, due to substandard product manufactured by the enterprise it has affected its bussines process. In the beginning of the decade on of the Toyotas brand was involved in an accident and the company was well aware of the existing faults but did not consider recalling due to fear of making losses. For instance, in the United States alone, the auto carmaker was affected by the significant increase of complaints related to the sudden caused unprecedented acceleration of the vehicle leading to death. What raised issues that are more ethical is the company responses regarding the death of motorists and passengers (Bowen & Zheng, 2015).
Toyota emphasized on profit taking and forgot to check the standard of manufacturing. When such practices became public knowledge across the globe, Toyota lost credibility especially in the United States. However, the firm survived but the effects include loss of fortunes through litigation and settlement of the affected parties. Even after the issues was subdued in time, lack of ethics affected Toyota image, credibility and reduced consumer confidence. As a result, the company halted sales and production of top brand vehicles in the U.S. and also issues a recall of estimated 9 million vehicles worldwide. Separately Toyota Motor Corporation was involved in a suit amounting to billions of dollars and other cases (Shin, Richardson & Soluade, 2014).
As a result of substandard manufacturing, the company faced many challenges. Toyota Motor Corporation was involved in a court case that determined it should pay a $1 billion penalty. The fine was as a result of evidence revealed by federal investigation relating to issues where consumers complained uncontrolled acceleration of its vehicles. The problem with the company system caused hundreds of car crashes causing the destruction of life. About four years ago, in 2013, the firm lost two lawsuits where the complainants argued that defective accelerator caused fatalities in 2005. The result was $3 million payout delivered to the victims. In the midst of many accusation and claims of deaths arising from defective accelerators, the management of the firm stood strong in their decision that the system had nothing wrong and therefore not responsible for the problems (Tennert, 2014).
In the near future Toyota should avoid threatening situations that can destroy the company image due to the production of substandard goods for the consumers. The problem solving technique adopted should not be limited to current solution but should also look into the issues likely to emerge in the future. self-reflection could be used a way of analyzing how the situation came to happen and the possible reasons of how it could arise in the future and the best techniques that can be applied in the future to solve such problem. Therefore, Toyota motor company production system should reflect on its roots of listening, stopping, and thinking to enable make improvements affecting the company.
To solve the crisis of faulty brake pedals the company should make improvement such as the introduction of the brake-override system to prevent the occurrences of such incidents in the future. For instance, when the driver pushes the brake pedal after the gas pedal, and the accelerator remains still active, then the system should be able to respond fully to the brake pedal. In addition, to avoid malicious attack from the rival companies, the engineers should implement the installation of Event Data Recorders that can be used to record the data before and after crash.
According to the analysis, the problem occasioned by the sticky accelerator is an engineering defect. The defect specifically was in the vehicle’s software, which led to the sticking of the pedals and not is caused by the misshapen in the floor mats as the management claimed. The time and the way in which the company responded to the whole issues caused many controversies. Stephan, (2016) argues that, Toyota Motor Corporation delayed in providing the public with a response, and no actions were taken by the management weeks after the occurred. Many times, the top executives downplayed the importance of press releases the need to inform the public. The lack of urgency on the part of the Corporation is a perfect example of how companies fail in proving necessary information and poor planning (Heizer & Barry, 2013).
To Stier, (2016) the handling of the events and the actions taken by the management raises a variety of ethical issues as a result of accelerator incidents and the decision to issue a recall on the affected vehicle model. For many decades, the corporation has gained a reputation for manufacturing safe and reliable cars for the market. The recall of vehicles with faulty pedals came toward the end of the decade when the firm’s strategy was oriented toward expanding its market and fulfilling an objective of surpassing market rivals General Motors. The aim was to become the number one automobile company across the globe.
According to Shin, Richardson & Soluade (2014), one of the strategies geared toward attaining the desire included aggressive expansion of its operation and setting of manufacturing plants in foreign countries. Toyota market principles included continuous improvement of its product and inspection of problems at the source. In addition, its culture and reputation for prospering accompanied the culture of accepting the responsibility of its product portfolio incidents.
According to Coombs (2014), situational crisis communication model explains that a crisis such as the one faced by Toyota causes the stakeholders and shareholders to make interpretations on the issue regarding the crisis. Such interpretations cause the company public to change how they interact with the firm. This is because people naturally keep guessing the causes and make attributions for many events even those negative and unexpected. Therefore situational crisis communication theory (SCCT), argues that for the crisis to be effective reputational threat and situations need to be assessment.
Communication problem amplified the problems that Toyota faced but there is strategy to this. When the consumer first launched their complaints about a problem such as unintended acceleration, Toyota response should have been very first in addressing the issues through the media. While the process was happening, the engineers and other experts would have internally investigated; the leading causes of the problem and report it to the top executive. Until the real causes were discovered, the marketing department should have reported the process of investigation and partial outcome to prove that the consumer complaints were the top priority and that the situation was under control (Coombs, 2014).
The report borrows from Kantian ethics to understand the underlying issues in the case study. An essential relationship between the company and the consumers and others should be humane and personal. Therefore, Kant believed that the enterprise actions to the publics should be dependent on the human relationships. Toyota focus was to build the image and improve the quality of its entire brand before and after the recall scandals. An incisive analysis reveals that the motive was not anchored in the moral duty but rather the desire to make more profit while rebuilding the image and reputation of Toyota (Bowen & Zheng, 2015).
If Toyota had followed the principles of Kantianism, in conducting business the issue of vehicle recall would have been handled immediately upon learning the concerns because it was the morally correct approach to consider the welfare and the safety of consumers. Failure to adequately explain the acceleration problem by the company contradicted with Kantianism model of doing the right thing for the consumer publics. In addition, the firm continued to distribute vehicles to the market knowing the accelerator defects and the dangers to the user. If the Toyota desire to deliver quality product was rooted in moral laws rather than self-interest such as making a profit, the lives of many and the damages paid could have been avoided (Bowen & Zheng, 2015).
However, Toyota did not consider taking the appropriate approach that resulted into billions of unnecessary losses due to inept ways of addressing the crisis. The company first response would have been to own the mistake during freak accidents instead of protecting the incidents and finger pointing at their suppliers. In addition, the company should have frequent and transparent updates through the press to update the public of the ongoing process in unearthing the problem and addressing the surrounding issues. This would serve as way of proving the positive actions taken by the team to control the situation.
According to Tennert (2014), the ethical dilemma facing the organization could have been solved using decision-making process approach. The approach has various components, which includes moral judgment, moral awareness, motivation, and the character. The systematic approach applies to the case study of Toyota that caused deaths and financial losses. The company having become one of the industry leaders faced crisis occasioned by faulty accelerator pedals and poor braking which led to myriads of crashes of global scale. Crane & Matten, (2016) explains that the problem led to recall of million vehicles in 2010 and settlement claims. The ethical dilemma placed the firm in a full-blown disaster because the CEO Akio Toyoda took a lot of time to admit the mistake on the part of the organization due to manufacturing faults.
The first step is a moral awareness that means the capability of the organization to detect and recognition the emerging ethical problem. This is an important decision-making process because the management cannot try to solve a problem which it cannot recognise (Carroll & Buchholtz, 2014). In the context of Toyota Motor Corporation, the CEO acknowledged the issue in the vehicle system but did not take action to rectify the problem in time. After identifying the challenge, the decision makers in the organization should formulate an action to solve the problem. This calls for a deeper sense of reasoning while recognizing egocentric and broad perspective that incorporates the societal needs. In this scenario, the company overlooked the issues because it recognized the problem causing fatalities but failed to take any systematic action to resolve the challenge. The course of action should have been taken such as thorough assessment of the internal systems (Parks & McGuinness, 2015).
The third stage in decision-making process entails the motivation, and this follows after the recognition of the problem and taking necessary action to solve the problem. In this stage, the decision makers would meet and determine the choices and the measures to be taken. Motivation is central because it rewarded the steps taken because the managers are likely to exercise ethical conduct but also report any cases of unethical practices (Carroll & Buchholtz, 2014). At Toyota Motor Corporation, one can argue that Akio Toyoda, the CEO was aware of the issues but choose to remain silent instead of responding to the fatal accidents that resulted in the death of people. Instead, he decided to conceal the reports detailing the accidents to evade financial responsibility (Parks & McGuinness, 2015). As such, there was no enough motivation by the executive to correcting the mistakes on the affected products and save the lives of the consumers and other potential victims. The situation can be avoided by formulating policies that demand to report of unethical practices.
In the last stage, executing any moral action requires strict ethical characters. The organization should be capable of resisting any form of opposition, overcome myriads of distractions ad formulate strategies to achieve firm’s goals within the limits of the ethical standards of the industry. Leaders should work hard to implement policies, uphold choices, and tackle any of the limitations to withstand difficulties (Carroll & Buchholtz, 2014). These leadership elements were present in Toyota Motor Corporation because the company knowing the challenges of dealing with the issues could not handle ethical responsibility in their volition. Thus, the company CEO Toyoda showed a lack of moral respect despite the organization having codes of ethics and a strict moral philosophy. This was responsible for ethical issues that surfaced and its effect on the reputation (Cummings, 2016).
Conclusion
The research paper critically evaluates the fact regarding the ethical issues and the business processes, which can enhance the reliability of the firm. The case reveals the rise of the several ethical concerns. Nevertheless, there exists crucial requirement to analyze the factors affecting the manufacturing and the production processes of Toyota Corporation. There are five issues highlighted in throughout this paper. Toyota is supposed to be the eighth largest car manufacturers throughout the different parts of the world. Being short of in, the ethical decision-making has considerably affected the implementation of the business processes and has also lowered the confidence of the consumers regarding the purchase of the cars.
There are different theories that have been highlighted with the help of this paper and these generate crucial impact on the execution of the business processes of the firm within the target market concerned. In the case of Toyota, morality and virtues are paramount and require to be considered for the successful production and marketing of services in the modern business environments. Business entities that observe internal and external ethical guidelines gain reputation gain competitive advantages and generate enough revenues that can be reinvested in foreign countries for expansion of corporations. Although unethical firms try to justify the course actions taken, the fact is that the damage still occurs. On the other hand, those companies that uphold ethics gain customer loyalty, huge competitive advantages from the stakeholder.
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