Introduction to Global Business p. 308 Week 6/Discussion Assignment ECONOMIC PERSPECTIVES –

Introduction to Global Business p. 308
Week 6/Discussion Assignment
ECONOMIC PERSPECTIVES – Toyota’s Safety Recalls
In 2009–2010, Toyota was forced to recall millions of its automobiles from around the world due to significant safety problems. Its president, Akio Toyoda, and other executives were required to appear before the U.S. Congress to explain how they would deal with the situation in the United States. Many reasons have been offered to explain Toyota’s problems.
It had veered away from its focus upon customer satisfaction and emphasis on making improvements and, instead, pushed to increase its worldwide market share from 11 percent to 15 percent.
Most experts pointed to problems Toyota experienced with its suppliers that can be divided into three categories. Tier-one suppliers, such as Bosch, Delphi, and Tenneco, deliver large integrated systems directly to Toyota. Tier-two suppliers provide parts and components to Toyota and the Tier-one vendors. Tier-three suppliers provide Tier-one suppliers with a single component.
Toyota had deviated from usual industry practice by naming favored Tier-one suppliers as the sole source of particular components. This resulted in close collaboration and a sense of mutual benefits. (Western manufacturers, on the other hand, award short-term contracts through bidding processes.) Such collaboration was largely responsible for the company’s successful implementation of its famed “just-in-time” manufacturing strategy, in which com- ponent parts were received exactly when they were needed to enter the production process, which significantly reduced inventories and their attendant costs.
When Toyota began an aggressive expansion program in 2008, it needed to rely upon Tier-two and Tier-three suppliers, many of whom were located out- side Japan. These suppliers were not subject to the same control that Toyota had over its Tier-one suppliers, and quality issues arose as a result.
In 2014, Toyota again was forced to recall 6.4 million vehicles due to minor flaws found in 27 models. Although the company took the blame, its reputation for quality was again tarnished.
What should Toyota do about the recall problem?
Why were the earlier recalls necessary?
How can you explain the need for the 2014 recall?
Source: “The Machine That Ran Too Hot,” The Economist, February 27, 2010, p. 74; “Another 6.4 Million Dents,” BusinessWeek, April 14–20, 2014, p. 25