When Toyota announced a global recall of its hybrid cars on Tuesday, its executives were probably wondering how they were caught in this decline barely two years after they had expanded their way to being the world’s largest car maker. It makes us wonder whether the breakneck expansion witnessed during last decade’s boom has led companies to be unmindful of other issues.
Toyota has been recalling cars for two weeks now on the concern that they were unintentionally and dangerously accelerating. But, as The Wall Street Journal reported this week, Toyota executives have known about a faulty accelerator pedal for at least a year. Why didn’t they do anything before?
“The heart of the problem: Its secretive corporate culture in Japan clashed with US requirements that auto makers disclose safety threats”, the newspaper wrote. The cultural gap also seems to have caused Toyota to mess up its US public relations after news of the first recall last month: Its Japanese executives misunderstood consumer psychology in a country more used to transparency. By failing to react vigorously at the onset, it fuelled panic.
The pages of business history books are dotted with similar examples of cultural mismatches. But if you add last decade’s hunger for more—many think that’s why Toyota suddenly neglected quality—to such existing mismatches, the sum can’t be all that good.
Take a few global deals.
China’s Lenovo acquired IBM’s personal computers unit in 2005. But, by 2008, it ran into cultural problems, the Journal wrote. Chinese executives complained their US counterparts talked too much during meetings; the Americans complained the Chinese never challenged others’ ideas. As of the middle of 2008, the rest of the PC market was growing twice as fast as Lenovo.
Closer home, Dr Reddy’s Laboratories acquired the German Betapharm in 2006. But cultural integration proved a thorn in the acquisition’s side: Last year, Betapharm hurt Dr Reddy’s profitability.
With the global public’s faith in companies already weak, it wouldn’t hurt businesses to pay attention to a little more than the next quarter’s bottom line.
Have companies been blind to long-term problems? Tell us at email@example.com