JC PENNEY, INC: The impact of rebranding on internal and external communication

 Introduction

Gerald approached the break room, seemingly for the last time in his 18-year career with JC Penney. Somehow, he still couldn’t accept the reality that his store in High Point, North Carolina was closing under the new company-wide strategic campaign. As he strolled into the employee break room to gather the last of his things, he ran into his fellow tenured employee, Norma. The expression on her face, lifeless and drained of color, said everything he felt in his heart.

“Still hasn’t sunk in, has it?” Gerald said. “For years, you and I have witnessed and experienced so much within our little store here in High Point. It's hard to believe we aren’t among the survivors. Have you heard from people at any of the other stores about whether or not they made the cut?”

Noticing Gerald’s state of disbelief, Norma replied, “From what I heard through the grapevine, we are one of five stores closing. The other stores that I heard got the axe are in Morrow, Georgia; West Dundee, Illinois; Des Moines, Iowa; and Culpeper, Virginia. I also heard that two call centers were closed during this restructuring process as well. All in all, we are among thousands of newly unemployed workers. How great does this new brand image appear now, I wonder?”

“That's unbelievable,” Gerald replied. “I didn’t think this brand strategy would have such an impact on other aspects of this company. Just a couple of weeks ago, we were adjusting to our new CEO from

Apple, and now we are adjusting to having no jobs. Doesn’t seem like it could get much worse, does it?”

“For us and the thousands of others who are unemployed, it wouldn’t appear that way. Even our fellow employees who have retained their jobs are talking about how difficult the new company-wide policies are to adopt. The rounded-dollar pricing, the loose-return policy, the three-tiered pricing buckets--very few employees fully understand how best to shift from the previous norms to adopt the new status quo. In some ways, can you really say you envy the employees of the ‘new’ JC Penney?”

Norma continued, her frustration building, “Have you had a chance to read the customer backlash that’s ensued from this rebranding? Very negative and very critical of the new company outlook. One customer went as far as to say that the new JC Penney is not customer friendly and suffers from an identity crisis. Is JC Penney now the ‘Target’ of department stores, trying to appear as the ‘cheap chic’ alternative? Many of our longtime customers may abandon the brand completely.”

“Well, I know one thing for sure. The JC Penney I worked for is going to walk out that door with me. Take care of yourself, Gerald. Try not to dwell on the past memories here too much.”

Just like that, Gerald’s friend and colleague walked out the door behind him. There was a lot of truth in Norma’s departing words. Gerald quickly grabbed his remaining belongings and turned to leave the employee break room one last time. As he pushed open the door, he said to himself, “How did things get to this point? Was Norma right when she said that the old JC Penney was going to walk out of the door with us?” Without hesitating further, Gerald followed Norma out of the room.

  

JC Penney’s Struggles

When online retail shopping began to boom, JC Penney blindly splashed into the water with both hands tied behind its back and immediately found itself struggling to integrate its business function into an online environment. 

In 2010, jcpenney.com was unable to handle large amounts of traffic during its Cyber Monday sale, and its Facebook page exploded with angry comments from frustrated consumers who were not able to place orders. This lack of preparation showed that JC Penney overlooked the potential for error in the system, ultimately pushing its customers toward competitors. JC Penney’s failure to translate its business model for an online atmosphere prevented growth outside its outlets and ultimately led online consumers to take their spending elsewhere.

Taking a look at how the business was struggling internally, JC Penney was slow to embrace methods that strong competitors were using successfully as they navigated profound changes in the retail landscape. When JC Penney encountered problems with its online store, company executives struggled to develop an efficient multi-channel return policy that would minimize the cost of returns for both online and offline purchases. Customer relationship management did a poor job of understanding its consumers and their behavior in the context of returning online purchases, which directly led to significant financial problems. JC Penney lacked the ability to adopt the proper business strategies that would have kept the company growing and left its consumers with a satisfying shopping experience. And in addition to these s internal struggles, JC Penney faced continuing challenges in trying to establish brand identity. 

During the late 1990s, JC Penney was burdened by high operating costs and got caught in a difficult middle market for clothes.^[1] With competition along a range of retailers – from heavy discounters, such as Wal-Mart, to high-end retailers, like Saks Fifth Avenue –  JC Penney was not able to meet the demands of consumers in a distinctive way. Furthermore, organizational alignment became another problem since JC Penney was known to purchase products from foreign suppliers who held little regard for the treatment of their laborers.^[2] This sociopolitical issue was perceived by critics as un-American and left JC Penney’s consumer base to question whether it should support such a business. By failing to protect itself, JC Penney damaged its brand identity and left many customers uncertain if they would shop there again.

JC Penney’s struggles were evident when looking at company sales. During the company’s last fiscal year, sales at stores that had been open for at least one year rose merely .2 percent, which is a significant drop from the 2.5 percent increase these stores saw the year before. Macy’s, on the other hand, saw a 5.3 percent rise store sales.³ 

In an effort to regain a competitive edge in the market, JC Penney brought in a new CEO in November 2011 – Ron Johnson, a veteran executive of Apple Inc. and Target Corp. – who was to pave a new path for future growth.

The New JCP  

JC Penney has recently developed a new brand identity, complete with new pricing models, a new return policy, a fresh, patriotic logo, and a restructuring of its store layouts to make the shopping experience more convenient and enjoyable for patrons. These changes were intended to help the company strengthen its position in the market while also maintaining ties with past customers and appealing to a younger demographic.  

In terms of pricing, JC Penney has developed a new, three-tiered system. This “fair and square” pricing model is broken into “everyday prices,” “month-long values,” and “best prices.” The red-tagged “everyday prices” indicate daily low prices that are about 40 percent lower than previous ones. “Month-long values” indicate discounts on merchandise that are changed each month. The blue-tagged

“best prices” are clearance prices, which will be established on the first and third Fridays of each month.^[3] These changes are aimed at promoting the company image as a higher-quality retailer, such as Macy’s, that offers its products at a discounted price, comparable to lower-end retailers like Kohl’s. 

Many customers in the past expressed dissatisfaction with JC Penney’s strict return policy, which required them to have a receipt in order to return items. The new “Happy Return” policy is meant to satisfy customers by allowing them to return “any item, anytime, anywhere, no restrictions.” If a customer has a receipt, he or she will be able to exchange the product or get a full refund. If a customer does not have a receipt, the item can still be exchanged, or that customer can earn a complete refund in the form of a JC Penney gift card.⁵

JC Penney also revitalized its brand by altering its logo. 

                        

The new logo, which can be seen on the right side, is much sleeker and more modern. The two squares (the blue square on the interior and the shape of the logo itself) signifies the new “fair and square” pricing model. It is designed to resemble the American flag, exemplifying the idea of patriotism and implying that JC Penney is an accessible, All-American store. 

Continuing to capitalize on nostalgic parallels to a sense of Americana, the large aisle passing through the middle of the store is called “Main Street,” and the outdated central jewelry counters have been replaced by a “Town Square.”  

Accompanying these changes is a brand new face of the organization. Ellen DeGeneres, who worked for the company as a teenager, has already been featured in multiple advertisements that highlight the new changes. Her role has sparked some controversy, as conservative groups such as “One Million Moms” have protested her position as the company spokesperson since she is homosexual. JC Penney has continued to publicly stand by DeGeneres. 

  

Communication Problems

The process of rebranding JC Penney has created an identity crisis for the retailer. Consumers are unsure of where the company falls on the retail spectrum: Is the company now positioning itself closer to a lower-end discounter or a higher-end department store? Confusion over the quality and pricing of JC Penney’s products has led to traditional JC Penney customers shopping elsewhere. JC Penney has focused more on gaining new customers, appearing to abandon its traditional customers.

Employees share this same confusion when adjusting to this new company-wide rebranding strategy. For example, in regard to the new pricing buckets that are part of the “fair and square” model, some employees, especially those within the jewelry department where deep discounting is the norm, have struggled with the three-tier everyday low price approach. On top of the employee and customer confusion, some department stores and call centers have actually been closed as a result of the aforementioned changes. 

The new “fair and square” pricing model is also unexpectedly communicating a change within JC Penney that long-time core customers are not buying into eagerly. These long-time customers grew accustomed to the old system of coupons and aggressive seasonal sales that once represented the JC Penney brand. The rapid and radical change on JC Penney’s part has created confusion and vociferous objection to the new system. Ninety-six percent of 420 recent reviews of JC Penney on the Consumer Affairs website rate it below two stars for satisfaction.^[4] Many customers argue that the departure from coupons has created a more expensive and less enjoyable shopping experience. JC Penney now faces a combative climb back to profitability, as it launches new campaigns and strategies to attract new customers but continues to alienate its established core customers.

With customer fallout from the rebranding strategy and employee confusion about the new internal policies, JC Penney faces a unique challenge moving forward. What communication problems does JC Penney currently face, and what can the company do to help clear up these underlying issues? What can JC Penney do in order to successfully communicate its new brand both to employees and customers?

             

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[1] Cohen, Elizabith.

[2] Armbruster-Sandoval, Ralph. ³ Reuters.

[3] Mohammed, Rafi. ⁵ Vann, Korky.

[4] “JC Penney.” 

LA-Z-BOY, INC: A Case Study in Internal Communication

INTRODUCTION

It was February 12, 2010, and Jim and Liz Hamby – owners and presidents of the Northern

California La-Z-Boy stores – were talking late into the night with one of their store managers, Traci Murdock.  The three say gloomily in one of the room vignettes, discussing why store revenues had not been more successful that week, despite special promotions and advertising.  Moreover, Traci and the Hambys were concerned about why they were off to such a poor start in, given that January is traditionally the second best selling month of the year.

Traci was also worried about her own job because her store’s business had been lackluster for most of the past year as well. She was out of ideas about how to return her store to the comfortable profit margins of previous years. Traci wondered if the sales staff simply was ignoring the training they had received.

She asked the Hambys, “Why do my employees continue to try to sell ‘their way’ and not follow our “company recipe,” despite their repeated poor results?”  “How do I convince them that what we teach is the best way to get them to sell the most?”  Most of all, she questioned, “How can I get my store back to being number one and getting everyone hitting their sales targets like we have in years past?”

BACKGROUND

Jim and Liz Hamby had been the owners of the Northern California La-Z-Boy stores for nearly 15 years.  They took over the company in 1997 from Liz Hamby’s father, Eugene Goldberg ^{1 2}. 

At first the couple saw steady profits from the four stores they inherited.  Then, after implementing their business strategies, they began to see rapid growth in sales and profits.

In fact, they moved all four of the stores to new locations and grew their market to six stores which covered a much greater area of Northern California. They expanded their company from having only about 40 employees and four stores to having more than 150 employees and six stores in just over a decade.  

Furthermore, the Hambys’ most profitable store was continually ranked in the top five and two of their other stores in the top 25 of the more than 300 La-Z-Boy stores across the United States³.

Traci Murdock had been a manager of the top-performing Roseville La-Z-Boy Furniture Galleries store for some six years, a highly successful period in the history of the Northern California stores.

                                                          

^{1 2}                    Reego, Jim and Liz.  Presidents and Owners of the La-Z-Boy Furniture Galleries Stores in Northern California.

                                         “Answers from the Employees at La-Z-Boy.”  La-Z-Boy Store, Sacramento, CA 95746.  30^th April 2012.

³               La-Z-Boy Incorporated.  “Northern California La-Z-Boy Furniture Galleries.”  La-Z-Boy Website.  La-Z-Boy 

                                Incorporated, 2012.  30^th April 2012.  <http://www.la-z-boy.com/About/?WT.ac=about@FooterMenu>.

However, in large part due to the recession that struck in 2008, all six of the Northern California  La-Z-Boy stores took serious hits to their profitability.  Business in Northern California, which had been booming for the five years up until 2008, saw as much as 30 percent decreases in some monthly sales⁴⁵.  But it is important to note that the number of customers coming into the stores during those months had not decreased by nearly that much.

KEY PROBLEM

Clearly, the recession could not be entirely blamed for such a drastic drop in sales.  There were many internal business problems that had to be addressed.  Furthermore, Jim and Liz Hamby knew that if they hoped to survive the recession and again be successful, they would have to exert some control adapt and advance their business strategies in ways that would fit the current times and regain profitability.

INCREASED TURNOVER

They noted that the number of new employees had significantly increased.  For one thing, this was because the Hambys had recently opened two new stores, adding 20 or so new employees.  Second, La-Z-Boy paid a commission-based salary, and when employee incomes dropped when their sales declined due to the recession, the turn-over rate of the company significantly increased.

The increased percentage of new employees left La-Z-Boy management struggling to instill a strong company identity as well as implement the proper sales “recipe.”  During the successful years, the employee ranks were more stable -- most of them had been with the company for several years. Therefore, the majority of the employees knew proper store etiquette, attire, and sold products in what the Hambys viewed as the ‘correct’ ways.  Day-to-day activities went more smoothly and less time was spent teaching employees how to sell or trying to persuade them that the tried-and-true sales methods they had been taught would work.

In 2010, managers failed to maintain a solid customer-close ratio. This was especially critical in the wake of the recession, when it was urgent to convert as many walk-ins as possible to happy customers, since fewer customers were venturing into the stores.

Weary of trying to push salespeople to pitch products using the traditional sales “recipe,” so forcefully pushed by the company, managers began to stray from past practice.

The Hambys argued about what actions they should take in order to reinvigorate the use of their traditional selling strategies throughout the entire company. They suspected that inconsistent internal communication was the culprit, leading plummeting sales and decreased profits.

                                                          

^{4 5}             Reego, Jim and Liz.  Presidents and Owners of the La-Z-Boy Furniture Galleries Stores in Northern California.                                  “Answers from the Employees at La-Z-Boy.”  La-Z-Boy Store, Sacramento, CA 95746.  30^th April 2012.

GERS to RMS

In an attempt to reduce costs and improve company efficiency, the La-Z-Boy stores had moved from a General Electric Retail System computer program (GERS) to a Retail Management System computer program (RMS).  GERS was a computer system that required at least one office staff person to input the sales orders and then at the end of the day compute store totals and send those computations to top management.  The new system, RMS, was a computer program that could be accessed by anyone working for the company. It allowed each salesperson to input his or her own sales; the program then automatically computed the totals.

Despite the benefits of this new program, many employees, and even managers, were hesitant to use it.  When the Hambys spoke with Traci, she claimed that “none of my employees understand how to use it,” and that she “repeatedly has to stay late to input all of their sales.”  In order, for the new program to be useful, the employees had to receive adequate training in how to use the system, and the program would have to be universally used by all the employees.

WAREHOUSE TO RDC

Next, La-Z-Boy Incorporated – the manufacturer and supplier of the furniture to all the privately owned branches of La-Z-Boy Furniture Galleries across the country – built a Regional Distribution Center (RDC) supplying all of the west coast La-Z-Boy stores.  Rather than have each individual vendor store products in their own warehouse, La-Z-Boy Inc. wanted to manage inventory centrally.

After weighing the costs and benefits of moving to a new distribution method, the Hambys realized the RDC would be best for their stores.  So the Hambys sold their 60,000 square-foot warehouse and transitioned to using the RDC located in Southern California. The managers and salespeople had to be trained how to properly place orders and taught how to check order statuses so they could accurately inform their customers.

Moving forward, the Hambys knew they would to determine the best ways to teach their employees about the new means of distribution.  The company could not afford to have employees incorrectly place orders or cause delayed shipping to the customers.  Therefore, it was up to management to not only train the employees in placing orders, but also to teach them how to contact the RDC and track their orders.  Ample communication among all the store employees and the RDC would be vital to the success and efficiency of the new means of distribution.

ICOVIA

Finally, the La-Z-Boy stores introduced the online interior design software, Icovia.  This computer program did two major things.  First, it allowed designers to show customers any piece of furniture in any fabric, style, or color in a 3D computer model^[1].  Second, it allowed customers to give a designer their room dimensions and then the designer could place the furniture virtually and show customers what their room might look like. This computer program significantly advanced the way in which in-store selling could be accomplished and would be extremely advantageous for designers. 

When a customer would come into the store, a salesperson would greet him or her and then try to figure out his or her wants and needs.  Upon realizing that the customer was in search of more than just one piece of furniture, the salesperson would introduce a designer to the customer.  Then, as a team, the designer and salesperson would propose options for the furniture the customer needed.

Icovia was an advanced computer program; although potentially of enormous benefit, it required coordination of communication at multiple levels to be used correctly.  Since the program was fairly new, the Hambys would have to establish a protocol to guide multiple employees in helping the customers through the process.  The Hambys knew that eliminating the salesperson from the equation, letting customers desiring room “make-overs” work only with a designer, would not be a viable option. Salespeople and designers had to work together, and management would need to devise new internal communication guidelines for the employees to follow if Icovia was to be used successfully.

CONCLUSION

The Hambys faced a critical time in their company, and recognized in 2010 that the communication tools used in the stores and in the interaction between owners and store managers were vital to their future success. They needed to re-instill faith in sales protocols and train employees, new and old, to adapt to the several important company advancements.

DISCUSSION QUESTIONS

1.      What might have motivated employees to abandon the standard sales techniques they had been taught?

2.      What internal communication tools could have helped managers to identify the problem sooner?

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[1] Icovia.  “Icovia Online 3D Interior Design Software.”  – Space Planning and Interactive Floor Plan Software for                             Retailers, Manufacturers, Designers, and Realtors.  24^th August 2010.  Website.  30^th April 2012.   <http://www.icovia.com/3d/>.

TOYOTA, INC. A Case Study in Communicating Bad News

INTRODUCTION

In 2005, Lupe Lee bought a new Toyota Camry from a local Sunnyvale, California, Toyota dealership, donating her immaculate Camry bought in 1990 to a local charity.  Going from an older Camry model to a newer one, it was obvious that Lupe not only liked Camry cars, but she liked Toyota and its business model.  However, this was all about to change on September 9, 2011.

 

On this day, Lupe and her daughter were on their way to Berkeley for a niece’s wedding.  They planned to stop in Burlingame to pick up Lupe’s sister, Rose. They arrived at the sister’s apartment early, so Lupe and her daughter went inside.  

After visiting in the apartment for a time, the three of them went out to get into the Camry to continue on to Berkeley.  Lupe would have to make a U-turn to head back towards the freeway.  Instead, she decided to maneuver into a nearby driveway to turn around.  This is when things began to go horribly wrong; as they started up the driveway, the car began accelerating. Rose exclaimed “Lupe!  What are you doing!? Why are you going so fast!? Push on the brake!”  Lupe had no control of the car; she was terrified.  She tried desperately to press the brake, but nothing happened. She quickly realized that the car mat had been lodged under the gas pedal forcing the car to accelerate and making it impossible for her to slow down.

 

Her Camry crashed through the garage doors at the end of the drive, and Lupe had to think quickly about what to do next (reference Exhibit A for the crash visual).  She knew that if she kept going straight, she could go through the wall into someone’s apartment, which had the potential of resulting in a serious or fatal injury to the occupants.   Seeing her sister’s large and sturdy Toyota Land Cruiser parked nearby, Lupe decided the only way to stop her car was to smash into it.  She hit the Land Cruiser, pulled on the emergency break, took the keys out of the ignition, and they were finally at rest.

 

They got out of the wrecked car trembling and confused as to what had happened.  Lupe called the fire department to inspect the garage, and a tow truck company to deal with the car.  While they waited for the fire department to arrive, Rose mentioned to Lupe that she had heard something on the news about Toyota’s cars experiencing unintended acceleration problems.  Lupe replied, “Maybe this is the same thing, I don’t know.  But all I do know is that I am never going to drive this car or another Toyota car ever again. My old Toyota never had any problems; I thought that they were known for the quality of their cars.  But, if more people with Toyotas are having problems similar to what just happened to us, I wonder what has gone wrong with Toyota and why they didn’t let me know about the danger.”^[1] 

  

COMPANY BACKGROUND

Lupe was not alone in her perception of the quality of Toyota cars. The automaker had become the largest automaker in the world based on that reputation. In fact, West Virginia Senator John D. Rockefeller IV said he had “worked very hard to bring a Toyota engine and transmission plant to Buffalo, West Virginia, because I knew Toyota was a company built on the philosophy of quality first.”^[2]  However, after Lupe’s story and many similar incidents across the country, it became clear that, as Rockefeller noted, “Somewhere along the way, public safety took a back seat and corporate profits drove the company’s decisions.”^[3]

 

In the year 2000, Toyota recalled 8,379  vehicles, which accounted for just 0.034% of all cars recalled that year.^[4]  In 2010, a decade later, 4,872,583 Toyota vehicles were recalled – more than any other auto manufacturer that year. This made Toyota responsible for 29.7% of all vehicles recalled in 2010.^[5]

 

TOYOTA’S INTERNAL PROBLEMS

According to Toyota’s own president, Akio Toyoda, the company’s traditional priorities – safety first, quality second, and volume third – became confused. “We [Toyota] pursued growth over the speed at which we were able to develop our people and our organization,” which “resulted in the safety issues.”^[6]  Internal documents from Toyota seem to back up the president’s statement. In a document from Toyota’s Washington office, the company’s stated goals were to “Promote

Toyota’s Agenda,” “Protect [Toyota’s] interests,” and “Maintain receptive environment to grow [Toyota’s] business.”^[7][8]  Later in the same document, Toyota’s Safety Group called the negotiated recall of the Camry/ES a “Win for Toyota” because it saved the company more than $100 million.⁸

This shift in Toyota’s priorities away from quality to quantity reveals a problem with its internal decision-making process. The decline in quality of Toyota vehicles resulted in safety issues that affected North American consumers. 

All decisions regarding recalls, however, were made in Japan. Not even James Lentz, President and COO of Toyota Motor Sales, North America, had the authority to make decisions related to recalls.^[9][10]  This corporate structure prompted US Secretary of Transportation Ray LaHood to note that “good professional, capable people in North America [are] running the company without the kind of opportunity for decision making.”^[11][12]  LaHood was also worried that for the North American executives, “their issues may not have always been communicated or heard in Japan.”^[13][14]

 

In 2006, the disconnect between the North American and Japanese branches of the company was highlighted by Jim Press, then the president of Toyota Motors North America, in a slideshow. In the presentation, he gave evidence of the brand’s slipping reputation in the form of customer loyalty graphs and excerpts from such media outlets such as the Detroit News and the Associated

Press. He followed with a plea for more open communication between Toyota Motor

Corporation and Toyota Motors North America, noting that Toyota Motors North America’s

“regulatory and public affairs leaders need to know the current status of TMC’s countermeasures, so [Toyota Motors North America] can develop appropriate messages and protect Toyota’s reputation.”^[15][16]

The authority that the Japanese office had over the American office and the lack of communication between the two was also mirrored in Toyota’s dealing with the National Highway Traffic Safety Administration (NHTSA). LaHood and the NHTSA met several times with – as he described them –  “very good professional, capable people” at Toyota Motors North America.^[17][18]  He believed, though, that the company responded in a timely and effective way only after his visit to Japan to talk to Toyota Motor Corporation President Akio Toyoda.^[19]

Toyota’s slow reaction may have stemmed from cultural differences between Japan and the US.

In Japan, the decision-making process is typically longer than in the United States, because

Japanese companies like to reach a consensus for action.¹⁵ In Japan, taking the time to reach a consensus before action shows humbleness and modesty. In America and the West more generally, on the other hand, this lack of time sensitivity may be interpreted as a sign of apathy and indecisiveness. In Japan, companies also have the luxury of operating in a society in which “consumer activism is undeveloped and lawsuits uncommon.” ¹⁶  They are therefore sometimes unprepared for and unfamiliar with having to respond quickly to public pressure.

TOYOTA AND THE NHTSA

The lack of productive communication within the Toyota Corporation complicated and extending its dealings with United States government and the NHTSA. The NHTSA had opened eight separate investigations into sudden unintended acceleration since the year 2003.¹⁷  One of these investigations (labeled PE04021 by the NHTSA) focused on Lexus vehicles specifically.  During this investigation, Toyota responded by challenging the definition of sudden unintended acceleration. The company argued that vehicle surges should only include events less than a wide-open throttle event. 

This was in an attempt to eliminate the two types of incidents that Toyota and Lexus owners were complaining about most: surges that occurred when the brake was pressed or when the vehicle accelerated to high speeds.¹⁸

 

In March 2007, investigations were initiated into the role of floor mats in Toyota and Lexus sudden unintended acceleration cases.  The investigation focused on the use of all-weather floor mats that could slip and get caught under the accelerator pedal of these vehicles.  In response to this investigation, Toyota told the NHTSA it had warned drivers not to stack these carpets on top of the original carpets in the vehicles.  The NHTSA instead continued the investigation until Toyota initiated a limited floor-mat recall months later.¹⁹  Toyota’s messages appeared to be an effort to halt the investigation instead of admitting a problem existed.

 

In April 2009, Jeffrey Pepski of Minnesota submitted a petition to the NHTSA to re-open investigations into the floor mats of Lexus ES350 vehicles when his vehicle experienced sudden

¹⁷ Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration, p. 14, Rep.

Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012.

<http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

18  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.	, p. 20, Rep.
19  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click.	, p. 22. Rep.

Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012.

<http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

unintended acceleration on the freeway, despite having standard carpet mats rather than the allweather ones.  

In May, Toyota interceded and attempted to kill the defect petition by responding point by point to the allegations in the report.²⁰  Three months after these attempts, the death of Mark Saylor and his family occurred in San Diego in their ES350.  Following this incident, “…Toyota began sending letters to owners notifying them of an unspecified upcoming recall to fix the unintended acceleration issue. In the letters Toyota stated no defect existed. Soon thereafter, the NHTSA publicly rebuked Toyota, calling the company’s message to the public “inaccurate and misleading.”²¹  

Toyota itself experienced an incident of unintended acceleration in April 2003 when a trim panel caught the accelerator pedal of a Sienna undergoing dynamometer testing.  Toyota’s response to the NHTSA was that it had reviewed its manufacturing processes and had concluded that this was an isolated incident and did not necessitate further investigation.  Despite this message, Toyota changed the design of the trim panels in June of the same year.²²  Toyota did not want to admit a problem existed and instead fixed it without notifying the NHTSA.

 

Toyota also attempted to shut down petitions to the NHTSA by arguing that increased media attention about the sudden unintended acceleration cases was generating unwarranted consumer concern and complaints.  In response to petitions against the Toyota Tacoma pickup, the company claimed that the petitioners’ arguments that the truck was more dangerous than other vehicles were not valid because those vehicles had not received the same media attention.²³

 

In most cases of sudden unintended acceleration, the driver attempted to press the brake pedal to slow the car.  In an engineering analysis carried out by the NHTSA, it was found that this action actually rendered the brakes useless.  This finding went against statements made by Toyota in 2005 that said the brakes would overcome any throttle malfunction.  Toyota did not move to implement a brake-to-idle system that would overcome this problem until November 2009, when it suffered serious negative feedback.²⁴

 

                                             

²⁰  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration, p. 22, Rep.

Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012.

<http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

²¹  Victor L. Heller, John R. Darling, (2012) "Anatomy of crisis management: lessons from the infamous Toyota

Case", p. 159.  European Business Review, Vol. 24 Iss: 2, pp.151 - 168

²²  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration, p. 36-37.

Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

23  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.	, p. 37.
24  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click.	, p. 38. Rep.

Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012.

<http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

During the Senate Commerce Committee hearing March 2, 2010, Senator John D. Rockefeller IV pointed out that Transportation Secretary Ray LaHood, the head of the department that oversees the National Highway Traffic Safety Administration, had testified that Toyota was “safety deaf and didn’t respond to [his] concerns until [he] personally called Mr. Toyoda in Japan.”^[20][21]

 

PUBLIC RELATIONS

Toyota was afraid of experiencing the same outrage from its customers that it had experienced from the government. Its good reputation had been garnered from excellent customer service and top-of-the-line workmanship resulting in unrivaled reliability.  So, in an attempt to protect itself and avoid damaging its pristine reputation, Toyota needed to determine whether it should admit  fault to customers or try to solve the problem and keep them in the dark.

 

Toyota’s external communication with its customers was questionable regarding the sudden accelerations in vehicles.  It issued a statement saying that, “Toyota does not believe that uncontrollable acceleration can occur without the driver applying the accelerator pedal.”^[22]  In further attempts to discourage any belief that Toyota was at fault, the company issued another statement regarding the allegations that the floor mat was the culprit, saying, “No defect exists in vehicles in which the driver’s floor mat is compatible with the vehicle and properly secured.”^[23]   

 

Finally, Toyota relented and took a minimal amount of responsibility for the problem.  First, it addressed customers in a letter, explaining that the NHTSA conducted a very thorough inspection and it only could conclude that the acceleration problems were attributable to improper installation of floor mats.²⁸  This statement faced resistance very quickly when numerous Toyota owners stepped forward complaining that they too experienced sudden unintended acceleration, even after they took the floor mats out of their vehicles.²⁹  

 

28  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.	, p. 50.
29  Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click.	, p. 50.

After it had become evident that there was more to the problem than Toyota was admitting, the company went on the defensive.  The president of US sales made the audacious statement that “we know what the problem is.  We have the fix.  And we’re going to take care of our customers.”^[24]  Toyota did its best to appear strong and in control to its customers; however, the reality was that it had been slow to solve the problem.  

CONCLUSION 

After Lupe consulted her insurance company, she was left with devastating news.  The insurance company informed Lupe that the floor mat was the cause of the accident, and it was not the car malfunctioning.  Because of this, Lupe received no insurance compensation.  Still traumatized by the accident, she refused to buy another Toyota; so, Lupe opted for a Honda Accord and has been safe behind the wheel ever since.

  

DISCUSSION QUESTIONS 

1.      Identify the cultural differences between Japanese executives and American executives that may have affected the way Toyota dealt with these issues.

2.      How should Toyota have initially handled consumer complaints? 

3.      Do you think communication between the Japanese headquarters and the North American offices of Toyota should be restructured? If so, how?

4.      What needs to be done to improve communications between Toyota and government regulators?

5.      What would be the ideal communication plan for Toyota to adopt regarding its relationship with customers?

Exhibit A

 

Lee, Lupe, and Sandlin, Rose. "Toyota Accident Interview." Personal interview. 11 Mar. 2012.

             

REFERENCES

Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration.

Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012.

<http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

Lee, Lupe, and Sandlin, Rose. "Toyota Accident Interview." Personal interview. 11 Mar. 2012.

United States. Cong. House of Representatives. Committee on Oversight and Government Reforms.

Toyota Gas Pedals: Is the Public at Risk?. 111 Cong., 2nd sess. S. Doc. U.S. Government

Printing Office, 24 Feb. 2010. Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-

111hhrg58346/pdf/CHRG-111hhrg58346.pdf>.

United States. Congressional House of Representatives. "Response by Toyota and NHTSA to Incidents of

Sudden Unintended Acceleration." Response by Toyota and NHTSA to Incidents of Sudden Unintended Acceleration. Committee on Energy and Commerce, Subcommittee on Oversight and

Investigations, 23 Feb. 2010. Web. 19 Mar. 2012.

<http://democrats.energycommerce.house.gov/Press_111/20100223/Transcript.OI.02232010.pdf >.

United States. Congressional Senate. Committee on Commerce, Science, and Transportation. Toyota's

Recalls and the Government's Response. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing

Office, 2 Mar. 2010. Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-

111shrg66219/pdf/CHRG-111shrg66219.pdf>.

Victor L. Heller, John R. Darling, (2012) "Anatomy of crisis management: lessons from the infamous

Toyota Case", European Business Review, Vol. 24 Iss: 2, pp.151 – 168

             

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[1] Lee, Lupe, and Sandlin, Rose. "Toyota Accident Interview." Personal interview. 11 Mar. 2012.

[2] United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p.2. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[3] United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p.2. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19

Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[4] United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p.3.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19

Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[5] United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p.5. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19

Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[6] United States. Cong. House of Representatives. Committee on Oversight and Government Reforms.Toyota Gas Pedals: Is the Public at Risk?, p.77. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 24 Feb. 2010.

Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111hhrg58346/pdf/CHRG-111hhrg58346.pdf>.

[7] United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p. 41. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[8] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>. ⁸ United States. Cong. Senate. Committee on Commerce, Science, and Transportation.Toyota's Recalls and the Government's Response, p.44. 111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[9] United States. Cong House of Representatives. "Response by Toyota and NHTSA to Incidents of Sudden Unintended Acceleration." p.161.  Response by Toyota and NHTSA to Incidents of Sudden Unintended Acceleration.

Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, 23 Feb. 2010. Web. 19 Mar.

[10] . <http://democrats.energycommerce.house.gov/Press_111/20100223/Transcript.OI.02232010.pdf>.

[11] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 67.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[12] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[13] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 41.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[14] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[15] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 73.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[16] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[17] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 67.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[18] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[19] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 66.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web. 19 Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[20] United States. Cong. Senate. Committee on Commerce, Science, and Transportation. Toyota's Recalls and the Government's Response, p. 27.  111 Cong., 2nd sess. S. Doc. U.S. Government Printing Office, 2 Mar. 2010. Web.

[21] Mar. 2012. <http://www.gpo.gov/fdsys/pkg/CHRG-111shrg66219/pdf/CHRG-111shrg66219.pdf>.

[22] Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration, p. 49. Rep.

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[23] Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. Toyota Sudden Unintended Acceleration, p. 50.

Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.

[24] Kane, Sean, Ellen Liberman, Tony DiViesti, and Felix Click. , p. 50. 

Rep. Safety Research and Strategies Inc., 5 Feb. 2010. Web. 10 Mar. 2012. <http://www.safetyresearch.net/Library/ToyotaSUA020510FINAL.pdf>.