MANAGING INTERNATIONAL BUSINESS

RESPONSIBLY
Assignment 2 – Company Analysis

Lecturer: John Walsh

Student name: Le Phuong Anh

Student ID: s3686776

Course code: BUSM4692

 I. Introduction
Mahajan (2011) proclaimed that more businesses are prone to perceiving that sustainable
success of a firm and stakeholders’ value can no longer be accomplished solely based on
maximizing profits but rather, depending on both market-oriented and responsible conduct.
The purpose of applying Corporate Social Responsibility (CSR) to a business is to embrace
the responsible activities of the organization and motivate a positive influence through its
activities on customers, workers, communities, shareholders and other members of the public
(Fontaine 2013). This report will deliver the description of CSR activities of Toyota Motors
Corporation (TMC) and further analyse as well as evaluate whether the company sticks to its
CSR philosophy based on relevant theories. Moreover, recommendations will be given to
address these CSR problems of the company.
II. Overview of Toyota
Toyota Motor Corporation is a Japan-based firm which specializes in the production and
sales of motored vehicles globally, with a market capitalization of $197.5 billion (CNN
Business 2019). TMC was officially founded in 1937 as an independent firm and by the year
2000, it was Japan’s biggest and the world’s third largest car company. The late 1990s
witnessed approximately 5 million units annually in sales and monitored around 9.8% of the
global market for motored-engine vehicles (Austenfeld 2006). As of 2019, Toyota gained the
9th position in 2019 World’s Most Valuable Brands, according to Forbes (2019).
III. Analysis
1. Description of Toyota’s CSR activities (700)
TMC released its “Contribution towards Sustainable Development” report in 2005 as an
interpretation of the Guiding Principles at Toyota which focuses on the company’s
relationship with its stakeholders. Later in 2008, it was revised to be the CSR Policy that
shows concerns with consumers, workers, stakeholders, business partners and the global
community. Toyota’s CSR policy focuses on 3 main parts: social initiatives, environmental
initiatives and governance.
In terms of environmental initiatives, Toyota collaborates with related firms, employees,
stakeholders and business partners to promote environmental management in all parts of the
world and in all aspects. The company created the Toyota Earth Charter (in 1992) as a policy
in order to contribute to the sustainable growth of the society and the earth through its CSR
activities. In 2015, Toyota released announcement of the “Toyota Environmental Challenge
2050” which contains a total of 6 challenges (see appendix 1) and specific measures to each
challenge to reduce the environmental burden caused by automobiles to as close to zero as

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possible while implementing solutions to positively contribute to the earth and the
communities with the hope of creating a more sustainable society (Toyota Motor Corporation
2019).
Regarding social initiatives, Toyota endeavors to carry out the philosophy of respecting
human and labor rights though providing opportunities to their employees to contribute to the
society and achieve self-realization through their work, and empowering them to improve
their critical and creative thinking. Toyota also mentioned that they are pursuing cleaner,
safer and more advanced technologies of sustainable mobility to minimize facilities caused
by traffic accidents to zero (see appendix 2). Ever since its establishment, it is Toyota’s top
priority to drive its particular attention to quality which will satisfy customers. Moreover, the
company encourages open and just business operation, and raises severe objections against
any type of bribery by any business partners. The CSR activities of social initiatives also
focus on helping people connect with each other with more freedom, constructing friendly
communities, working on living-support artificial intelligence (AI), and sponsoring sport-
related events which include Olympic and Paralympic Games Tokyo 2020 (Toyota Motor
Corporation 2019).
Toyota’s CSR policy pays attention to the governance as forming positive relations with all
shareholders and persistently delivering products that bring satisfaction to the customers are
of important ideas. Until now, Toyota still strives to enhance corporate governance. The
company has been working on the reinforcement of risk management structure since “the
recall problems” in 2010 by establishing the Risk Management Committee and assigning risk
managers of each branch to prevent and alleviate the impact of potential risks. As cyber-
attacks are becoming more perplexed and advanced, Toyota ensures the safety and security of
the customers’ property like personal information by enforcing its information security
through governance and risk management. Furthermore, Toyota also provided consultation
hotlines to receive any concerns to ensure that no potential issue is missed (Toyota Motor
Corporation 2019).
2. Evaluation
a. A three-domain approach
Caroll (1991) developed a three-domain approach based on his previous ideas of a
corporation’s responsibilities, presented by “the Pyramid of Corporate Social Responsibility”.
The three-domain model of CSR contains three responsibilities: economic, ethical and
legal.using a Venn diagram, it is found out that no aspect of these 3 domains is more
important or significant than the others, meaning a firm should not bias one aspect and

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sacrifice the others (Caroll & Schwart 2003). While the economic responsibility captures
activities which either directly or indirectly have positive economic impacts on the company
based on 2 criteria: maximizing profits and share value (Poitras 1994), ethical aspect is
identified as the moral activities of a company as expected by the norms of society (Caroll &
Schwart 2003). Finally, the legal domain of this CSR model explains the firm’s response to
legal expectations of the community in terms of federal, state and local jurisdictions or
through legal principles (Caroll & Schwart 2003).

Economic responsibility
Poitras (1994) explained that while direct economic activities usually involve actions
intended to increase sales or prevent litigation, indirect financial actions could be related to
those that are designed to enhance workers’ morale or the corporation’s public image.
Toyota’s tactics of increasing the number of customers choosing the brand include 4 parts:
Swift decision and quick action based on Genba Information which is a process that listens to
the customers’ feedback and work on the solution (see appendix 3), Staff training by
exclusive departments in order for staff to have a better understanding of the market,
Reinforce brand which focuses on creating vehicles that can satisfy different kinds of
purposes and lastly, Reduce total lifetime cost along with providing high value (see appendix
4) (Toyota Motor Corporation 2018). Overall, this tactic is good as Toyota approaches
customers by offering them incentives and making them the center of their operation, which
indirectly raised the company’s public image. Toyota brought about $272.3 billion in Fiscal
Year 2019 (Forbes 2019).

Ethical responsibility
Toyota has made a lot of effort into bringing ethics to its operation towards the people, the
community and the environment, such as being the pioneer of hybrid vehicle technology that
is eco-friendly, adopting the mission of reducing CO2 emissions, working to provide traffic
safety to the customers, etc. However, contrary to the mission statement of Toyota, the
company is receiving backlash regarding business ethics over the vehicle malfunction which
led to fatal traffic accidents. Many customers are showing anger towards the company as it
destroyed their belief in Toyota’s high quality products and Toyota’s slow response to the
matter made it worse.

Legal responsibility

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The legal domain of CSR relates to the firm's responsiveness to legitimate expectations
ordered and expected by society under the form of government, state, and domestic
jurisdictions, or through lawful standard as created and enhanced in case law. However, in
2014, Toyota got itself into a criminal investigation of safety problems that were linked to at
least five deaths. Toyota faced numerous private lawsuits over the issues and the automaker
admitted that it had covered up and releasing misleading announcements over the safety
problems that resulted in the acceleration when drivers tried to hit the brake to slow down
(Vlasic & Apuzzo 2014). The company dealt with the US Justice Department and has
reached a total settlement of $1.32 billion to resolve this scandalous criminal investigation
that had existed since 2007 (Cowan 2014).

b. Stakeholders
The shareholder theory is regarded as one of the most fundamental theories to analyze CSR
activities of a company. Stakeholders are different groups or individuals who influence or get
influenced by the operation of a company. Bigger companies have a wide range of
stakeholders: customers, suppliers, employees, unions, government, etc. Stakeholders are
divided into 2 kinds: primary and secondary shareholders. Primary stakeholders hold direct
effect on a company’s operation while secondary ones have less impact on any company’s
process or policy (Franch, Martini & Buffa 2010).
● Primary stakeholders:
- Stakeholders in the workplace
In the CSR Policy, Toyota stated that their employees play a valuable part of making the
company successful; therefore, the company strives for building a relationship based on
mutual trust and responsibility between employees and managers. Toyota foremostly
prioritized ensuring stable employment and improving labor conditions by adopting “Safe
and Healthy” philosophy in the workplace. However, in reality, a report of “The Toyota You
Didn’t Know” stated that employees are made to work, including at subcontract factories that
supply Toyota, a total of 16 hours/day, 7 days/week while getting the salary lower than half
the required minimum salary. Moreover, the report claimed that a third of Toyota’s assembly-
line employees in Japan signed a temporary contract; therefore, they had few rights and were
ordered to live in the firm’s dormitories. If they made any complaint they would be deported
(McNeill 2013). Toyota also has a reputation for penny pinching as in Japan branch, staff
members usually have to work together in one big room with no partitions between desks
because of the costly office space in Japan (Takeuchi, Osono & Shimizu 2008). However, as

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time passes by, there is an improvement in the treatment of Toyota to employees. In 2015,
Toyota has offered incentives with the aim to retain workers. They increased the company’s
retirement age to 65 receiving the same treatment as in their pre-retirement time and give
rewards to employees with greater contribution to the company (Nikkei Asian Review 2015).
- Stakeholders in the marketplace:
+ Consumers
Toyota stated that they make endeavours to improve safety, and satisfaction for their
customers. It is noticed that Toyota still received a 76% customer satisfaction rating (Bartlett
2019), with the model Lexus being given a mark of 85 for its dependability and reliability by
the American Consumer Satisfaction Index, the highest grade among automotive brands
(Suneson 2019). Due to its collaboration with the International Olympic Committee and the
International Paralympic Committee, Toyota’s “Mobility For All” campaign which aimed at
bringing the freedom to move to everyone, introduced a prototype concepts that would allow
paraplegic’s ability to move and contribute to the progress of mobility. Moreover, they also
presented products like the iBOT - a wheelchair for people to move around at eye level and
Human Support Robot for the handicapped which has robot arms and voice controls.
Essentially, this movement of combining social good with technology to create life changing
products has positively influenced the people (Mainwaring 2018). However, recently, Toyota
had another recall of 1.7 million vehicles of different models to fix the risk of shrapnel from
exploding airbags (Shannon 2019). This issue proves that although Toyota themselves
dedicated to improving the quality of their products for the safety and satisfaction of
customers, over the years, Toyota had multiple recalls of their vehicles due to malfunctions in
their products that caused annoyance both to consumers and the company itself.
+ Suppliers
As being the world’s one of the biggest automobile manufacturers, with a total of over 6
millions cars sold worldwide (as of 2019), Toyota Motor Corporation has many suppliers to
support its business operation. It is reported that in Japan, Toyota directly imports from
around 200 component suppliers. Some big names of the company’s suppliers include Tesla
Motor - in charge of supplying the powertrain of RAV4 EVs (electric vehicles), Samsung
Electronics - monitoring Car Mode App connecting Samsung smartphones to Toyota radios,
etc (Lioudis 2019). Hsu et al. (2006) stated that selecting supplier is an important procedure
that addresses how a firm selects strategic suppliers to improve their advantage.
A recall by Toyota of accelerator pedals issue which made the company withdraw 2.3 million
vehicles has emphasized the Japanese car giant’s reliance on components that are not

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produced in its factories. Toyota is well-known for its close relationship with Japan-based
suppliers, where the company efficiently have many parts manufacturers under its possession,
allowing engineers that are from either sides to be in good communication about the process
of products development. However, as it seeks to expand globally over the past decade,
Toyota has chosen foreign suppliers with which the company does not have a tight
relationship. Consequently, experts are saying that it might affect Toyota’s quality.
Moreover, Toyota is prone to cost cutting; therefore, this has put pressure on suppliers. It is
common for the organization to hope that suppliers are able to continue to develop their
supply all the time (Dwyer et al. 1997) even though the costs will be minimized in the long
run due to the fact that intense competition in the global market and a severe worldwide
economic downturn have provoked automobile manufacturers to cut down on expenses, scale
down research and development initiatives and resort to outsourcing component production,
assembly and even quality testing (Freytas-Tamura 2010).
● Secondary stakeholders:
- Ecological environmental stakeholders
In terms of environmental sustainability, Toyota has achieved a lot of things that would
satisfy the secondary stakeholders, which in this case are environmentalists or non-
governmental organizations (NGOs). Toyota has been carrying out eco-factory plan since
2004 with the hope of providing steady environmental solutions incorporated into each stage
from planning to design and operation to its factory activities and transforming into the top
plant in its region. Toyota has been struggling to minimize VOC emissions, one of the causes
to photochemical oxidation which leads to photochemical smog. Toyota has reduced the
usage of paints and thinners to continuously promote initiatives that are linked to painting
refurbishment plans and daily activities to reduce VOC emissions (Toyota Motor Corporation
2019). Moreover, Toyota pioneered for the hybrid system which contains electric engine that
is helped by a fuel-saving conventional engine and does not rely on the endurance of the
battery as the HEV battery is supported by the conventional engine (Wedhatama 2019).
IV. Recommendation
Overall, not all companies can act the same as their statement in the CSR policy, Toyota is
not an exception of this matter. Toyata’s most noticeable issues include the problem of
multiple vehicle recalls and the issue of cost cutting with suppliers.
In terms of CSR problem of vehicles recall, in 2015, Toyota withdrew 6.5 million cars due to
the failure in defective window switches (McHugh 2015); however, it was not until 7 months
later after the fatal car crash that Toyota knew of the problem when their management board

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should have taken action as soon as the accident occurred (Bebeteidoh & Takim 2016).
Toyota is advised to be ready to receive customers’ complaints through quick actions. The
top management board of Toyota should be more involved in leadership other than in
management as while management copes with the intricacies of budget and plan
(Andriopoulos & Dawson 2009), leadership is more of transforming and responding to
problems regarding the company’s vision and direction (Raelin 2012). For example,
mitigating the influence of products recall is not only about the quick response but likely
more about preparation. Managers should be prepared to assign roles, tasks, responsibilities
response structures are ready to take action.
Regarding the cost cutting issue that has been troubling Toyota’s suppliers, it is extremely
hard for Toyota not to cut down on expenses due to the intense competition in the global
market. However, one recommendation on this matter is that Toyota should try to build a
long lasting and friendly relationship with both local and foreign suppliers, so that when
Toyota has to reduce the budget for supply chain, the suppliers would understand and
empathize instead of making a big fuss. It is necessary for the company and supplier to build
a lengthy and steady relationship with each other in order to know equally the firm’s needs
and demands and how they can exploit each other in a way they both get a “win-win” (Tsai,
Chen & Yang 2008). For example, Ohno (1988) advised that the company should invite their
suppliers to contribute ideas to the design of products. By doing this, suppliers and company
can show respect and appreciation towards each other which helps them understand and trust
each other more.
V. Conclusion
In conclusion, Toyota Motor Corporation has a quite clear CSR report explaining what they
have done and what they will be doing in the future to benefit the people, the community and
the environment. However, Toyota is still unable to balance its economic, ethical and legal
responsibility and not yet has met the demands of all the stakeholders. There are still some
challenges that Toyota must face which are the issues of safety recalls and cost cutting on
suppliers; yet, some recommendations were provided with the hope for Toyota to adopt them
and improve.

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VII. Appendice
Appendix 1: Toyota’s 6 Environmental Challenges 2050

Appendix 2: Improve traffic safety

Appendix 3: Genba Information

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Appendix 4: Create Lifelong customers

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