Are other Asian companies fated to suffer a crisis like Toyota’s?

The crisis management scholar and practitioner Dr Ian Mitroff once observed that crisis management is all about culture.

The aim of any successful crisis management effort is all about shifting the culture of a company from one of being crisis prone to one of being crisis prepared.

Mitroff: are you crisis prone or prepared?

Nowhere is this more true than in the Toyota case as this Associated Press article by Mari Yamaguchi (below) seem to bear out. What is important about this article for businesses in Asia is how culturally unprepared even the best Asian companies who have expanded overseas are when it comes to crisis management.

Like most Asian companies, Toyota has traditionally relied on its close relations with governments and regulators to get itself out of trouble. The consumer and public were relatively compliant and did not have to be worried about. But then it got successful and expanded to markets where consumer expectations are different. Consumers in Western markets, and arguably internationalized ones, have this nasty habit of thinking that they are empowered and that they have certain rights and expectations that the company should conform to – and woe it is to the company that does not confirm.

So how many Asian businesses out there, many of whom now have international markets, are really culturally prepared to handle a crisis-like situation? How many of them have a culture that is crisis prepared – with clear policies of recognition and reward for whistleblowers, a detection system for early warning signals and response plans that covet the “family” of the most likely risks their industry faces?

How many of them are, however, crisis prone, companies like Toyota all puffed up by its own success even as the foundaions under its hard worn reputation were gradually being eroded as early warning signals were ignored and managers went into denial? In which end of the crisis prone-prepared spectrum does your company lie?

Toyota’s recall problems wake-up call

for Japan Inc.

Corporate culture limits ability to manage crises

Toyota Motor Corp.’s  poor handling of its massive global recalls has highlighted a glaring weakness in Japan’s otherwise sophisticated corporate culture: crisis management know-how.

Major companies have detailed plans for dealing with killer earthquakes or terrorist attacks but are largely unprepared to deal with disasters of their own making like product flaws that could lead to injuries or even death.

Toyota, a brand name once synonymous with quality, has come under fire for being slow and indecisive in responding to the safety problems that ultimately led to recalls of 8.5 million vehicles worldwide.

The puzzle is why Japanese companies that confidently stride the global corporate stage could set themselves up to fail on this crucial score.

Many pinned the blame on Japan’s consensus culture, where the lengthy decision-making processes hinder quick responses.

The reality, however, is not so simple.

Japanese corporations were nurtured in a remarkably business-friendly society where consumer activism is undeveloped and lawsuits uncommon. Japan’s first product liability law was passed only in 1994. The nation’s consumer protection agency has recorded only 112 product liability lawsuits in Japan since 1995, compared to more than 53,000 cases started in the U.S. in 2008 alone.

As they expanded abroad, Japanese companies largely ignored the need for crack crisis-management teams because there had been little need for them in the past. In Japan’s harmony-loving society, conflicts — when unavoidable — are generally settled behind the scenes.

But ultimately, it was Japan Inc.’s expansion overseas that exposed its vulnerability in this vital area as far-flung supply chains made it harder to control quality and companies encountered more demanding consumers.

“Toyota sent a serious wake-up call to all Japanese companies,” said Koichi Oizumi, a crisis management professor at Aomori Chuo Gakuin University. “Many of them still don’t understand that crisis management is necessary for their survival.”

Read more of this article here

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