Introduction:

We have selected Toyota Sahara Motors for our study. It is a 3s dealership or Franchise

which deals in Sales, Service and Spare parts. We will specifically analyze their Risk

Management in Service department. In service department there are many things that

they provide like tuning, body paint, denting, wheel balancing and every problem that

could occur in a Toyota product.

There are much more chances for risk occurrence in service department for example if

a customer wants to get paint his car they do not follow-up him because there are

likelihood that customer will be having complaint for the service and they will have to

provide free service until the customer is satisfied.

We have taken some research articles that comprises of risk management in services.

We have simply analyzed some descriptions proposed by authors and the relation with

our study. There have been many things that TSM is following. There are many things

that they had covered but still they are lacking behind.

Back Ground

Scholars from many disciplines have devoted careful attention to depicting how

organizations can identify, manage or communicate risk. An array of risk regulation

regimes (Hood et al, 2001) has been mapped, together with the national differences that

exist between how public authorities behave to mitigate risk aversion and enjoy trust

among the public (Löfstedt, 2005). Business leaders are invited to develop an
understanding of the changing nature of risks in a global era (for example by Cleary and

Malleret, 2008). For this purpose, there exist numerous procedures to identify, analyze,

evaluate and classify risks (see Renn (2006) for a synthesis), inclusive of systemic risks

(OECD, 2003). There also exist a range of managerial tools to decide whether and how

to avoid, transfer, mitigate or accept risks, both general (for example, Reason, 1997)

and industry-specific (for example, Crouhy et al (2006) for the banking sector).

One economist talked about the "hassle factor." The hassle factor relates to the amount

of time and effort required to make a decision relative to the amount of risk reduction.

For example, to use futures contracts or options contracts, a producer must spend time

learning, experimenting, studying, and using contracts. Unless the operation is large,

the risk reduction may be relatively small compared to the amount of effort involved.

(Kim B. Anderson and Harry P. Mapp July 1996)

The second reason for limiting risk presentations was the inaccuracy of price forecasts

and confidence intervals associated with price forecasts. If producers are given a point

estimate and the associated confidence interval, they simply say, "I can guess prices

that close, so why should I listen to this extension economist?" (Kim B. Anderson and

Harry P. Mapp July 1996)

The third reason is that risk is complex to teach and explain. Risk and decision making

may be taught and explained, but learning takes time that most decision makers

allocate to other activities. Producers often feel that they understand risk and would

rather spend their time learning about new production methods or technology. (Kim B.

Anderson and Harry P. Mapp July 1996)

The last reason is that when time is taken to teach and explain risk to producers, they

often respond with, "So what? What can I do about risk without reducing profit?" The

answer is most often, "Not Much!" Even though most extension economists realize that

many producers do not want to spend a lot of time learning about ways to measure risk,

how to make decisions in a risky environment and how to measure risk are still taught.

Sometimes risk is taught directly, using organized meetings and workshops. Other

times risk is taught by camouflaging it with other topics. Programs are developed that

teach producers how to think about and analyze risk. Producers may then apply risk

evaluation techniques to a host of situations. (Kim B. Anderson and Harry P. Mapp July

1996)

Problem Discussion:

Toyota Sahara has been facing numerous risks in providing services to customers.

These risks affect the decision making and performance of the company on a vast level.

The company is taking several preventive measures to cope up with those risks but

need to have some more precautions. Providing services to customers and satisfying

them has been a difficult task for the company.

Research Question

How Toyota Sahara Motors can mitigate the risk prevailing in their services while

satisfying the customer?

Aims and Objectives

Toyota Sahara Motors is a 3S dealership, providing its services from more than 2

decades in order to maintain its strength in the market and sustainability in long run. Our

objective is to analyze the risk that have or may occur in their service department and

what pre-cautions they have already taken and what are the risky areas where they are

still lacking behind.

Literature Review

Risk Management:

Risk management is a strategic activity (Andersen, 2006) that does not only consist in

models, algorithms, checklists or programs. The cultural dimensions of risk (Douglas,

1992) and its management have been repeatedly emphasized. Risk is acknowledged as

a situated knowledge mode that actors can adopt or leave at will, depending on needs

and circumstances (Boholm, 2003), to deal with the uncertainty of the future in a

quantitative manner (Reith, 2004). Professional patterns of communication and

coordination are, for example, the cornerstones of work safety routines (Sanne, 1999).

Likewise, successful risk communication depends as much on communicating values as

it does on providing technical information (Palenchar and Heath, 2007).

There are no solutions with respect to the future, there are only choices between

courses of action, each imperfect, each risky, each uncertain, and each requiring
different efforts and involving different costs. But nothing can help the manager more

than to realize what alternatives are available to him and what they imply. Most

producers agree that risk is part of the business environment and must be managed.

Successful producers learn to make decisions in a risky environment and a few view

risks as an opportunity. How risk is managed varies greatly depending on who is

making the decision and what forces are interacting in the decision process. (Peter F.

Drucker, Management: Tasks, Responsibilities, Practices, p. 515)

Problems in Risk Management:

As is true of most disciplines, there are some underlying assumptions or beliefs, or

'givens', about risk management. Some of the givens of current risk management

practice are as follows:

 Risk management has evolved into a profession and a set of concepts applicable

in most functional areas of business administration.

 Many risk managers perform their professional duties in relative isolation, i.e.

without being included in higher-level decision making.

 Many risk managers do not have authority commensurate with their

responsibilities.

 Many risk managers are called upon to react to adverse events, rather than

being involved in the planning that might have prevented those events. And;

 Many risk managers spend a disproportionate amount of their time on insurance

issues, rather than on more modern risk management topics.

Role of Data, Information and Knowledge in Risk Management:

Risk management depends for its relevance and success on research, learning and

application. Data, information and knowledge, whether generated from academic

research, practitioners' experiences or the experiences of others, must, at some stage,

be applied to be relevant. Within Organizations managers have to make risk-related

decisions at many levels. Research into managerial decision-making has generally

been normative-prescriptive, i.e. dealing with how it should be done rather than how it

actually is done in Organizations (Beach, 1997). Precisely because of norms, values,

organizational and other cultures, technologies, industry, and the information and

practice buried inside Organizations, knowledge (in all its forms) and decisions based

on that knowledge need to be translated into practice, organizational structures,

routines and management technologies. Falconer (2002), for example, concludes that

risk data presented to managers to help risk-related decision-making needs to be

quickly and easily assimilated.

Responsiveness and Customer Satisfaction

Responsiveness is also regarded as the critical factor in service recovery (Hart, Heskett

and Sasser 1990). In fact, when a service encounter fails, cus- tomer satisfaction is

primarily dependent on the responsiveness of personnel (Bitner, Booms and Tetreault

1990). Responsiveness consists of two di- mensions, the speed of the response and the

quality of the response. In this paper we concentrate on the former. The primary reason

is that the prompt re- sponse is regarded as critical in service quality (Zeithaml,

Parasuraman and Berry 1988). As an example, being "called back when promised" is

the most important service attribute to a customer (Coo- per and Summer 1990). In

summary, since prompt customer service response is critical in the customer

satisfaction process, salespeople's speed of customer service response is examined in

this research.

Halo Effect of Customer Satisfaction

Stability concerns the issue of whether the failure is relatively temporary or fairly

permanent. Failures with stable causes recur more frequently than failures with unstable

causes. The perception that a cause is stable will lead the customer to expect a similar

outcome in the future (Folkes 1984). Prior research has demonstrated that when

customers perceive the cause of a failure to be stable, they report higher levels of

dissatisfaction and negative behav- ioral responses than when they believe the failure is

a rare event (Bitner 1990; Folkes et al. 1987; Wirtz and Mattila 2004). Thus, when

customers attribute other-customer failure (e.g., cutting in line) to stable causes, they

tend to expect similar failures to recur even if the organization puts policies or

procedures in place to manage their guests' behavior (e.g., take-a-number system) and

thereby, will report higher levels of dissatisfaction, negative WOM, and unfavorable

future purchase intentions toward the firm.

Relationship between Customer Satisfaction and Loyalty

Discussing risk in the service department there are very much chances that if the

company does not mitigate or decrease the chances of occurrences. Customer will be

dissatisfied and hence he will not be loyal to the company anymore. According to

authors:

Recent industry data have contradicted conven- tional wisdom regarding the putative

strong rela- tionship between customer satisfaction and cus- tomer loyalty (see Jones
and Sasser 1995). Also, the relationship between customer satisfaction and customer

loyalty is not monotonie (Finkelman 1993; Jones and Sasser 1995; Oliva, Oliver, and

MacMillan 1992; Zeithaml, Berry, and Parasuraman 1996). The amount of increase in

customer loyalty associated with an increase in customer satisfaction is not the same at

all levels of customer satisfaction.

Empirical Findings

While doing a survey we found several things in Toyota Sahara Motors that were

containing risk and for some of them they have taken pre-cautions but still there are

some gaps.

Role of PDI (pre delivery inspection)

In past the company faced a risk that while delivering the vehicle to the customer there

might occur some sort of problem that company is not aware of. For example while

fitting the A.C the pipe could be remained unfitted and water can be flow inside the

vehicle rather outside. And, the customer realized while receiving the vehicle that there

are some problems. Such problems can cause serious troubles on the time of delivery.

Customer can be highly dissatisfied with the company and can complain. So they have

created PDI system (pre-delivery inspection). In which service technician use to

examine the vehicle before delivering to the customer to check that if there is any

problem that could be resolved at the spot in order to mitigate the risk of customer

complaint or dissatisfaction. This problem has been sorted out with the introduction of

PDI system.
Padding Estimates

There have been some sort of resistant customers who complaint about the charges of

provided services by comparing to competitors. So the dealership compensates the bill

of these customers in order to retain them. Now from where this money come from in

which they compensates? On our question they said that the company separates

amount of R.s 12,000 per month for these customers and they add this amount in good

will section.

Customer Loyalty Program

This is an additional service by company or way to delight customer. In this program

company invites top 10-20 most loyal customers with their family on a dinner at a

reputed restaurant and conducts a lucky draw. The winner gets a family tour to Malaysia

and other top 5 customers gets free maintenance services for specified period of time.

So, this is how they are adding value so that if customer is having any rare issue with

vehicle or an uncertain condition the vehicle has created, customer will remain at the

lowest level of satisfaction rather than becoming dissatisfied.

Transferring Risk

After analyzing that the customers are heading back towards company by realizing that

vehicle is still having some problems they have adopted a technique. In this technique

they use to ask customer right after the service (on the spot) to check their vehicle. If

there is any problem we are here to solve. Obviously at that time vehicle will work

properly and hence customer will not be able to recognize the possible problem on the

spot and will not come back because he has already given his feedback in positive
attitude. So this is how they are transferring risk to the customer and reducing the

chances of complaints and customer dissatisfaction.

Customer Satisfaction Incurs Cost

Once there was a customer whose vehicle’s engine got burned and a whole part was

suddenly disabled while traveling on highway. The warranty was expired but still he

complained about the incident and reported to Toyota Sahara Motors. Now in order to

keep the customer loyal and calm they were bound to provide him that spare part on

zero cost and all the labor that vehicle required.

So in order to retain customers at their dealership they needed to provide extra services

on zero cost and hence they increased their good will and loyalty.

Delivery Delay

For example, in case of body paints service the company has given 3-4 days delivery

time. It means the customer can receive his vehicle after 4 days. Now, due to load

shedding and some other problems the company is unable to deliver the vehicle on the

specified date. In such case if the company wants to deliver on time the cost will

increase. If they save the cost the vehicle delivery will be late. The decision of whether

to accept the cost or time is a critical one for the company. This risk has increased

effect in Pakistan due to load shedding problems.

Benefits of Appointment

In order to reduce the risk of unnecessary complaints like over-charges and waiting

time, company is currently using appointment tool. In which customer can get 10%
discount on labor if he get in through an appointment, and when customer call for

appointment the company personnel guides him about the price of required service and

exact time when the service bay will be free so that customer have to wait less.

Analysis

Professional patterns of communication and coordination are, for example, the

cornerstones of work safety routines (Sanne, 1999). Likewise, successful risk

communication depends as much on communicating values as it does on providing

technical information (Palenchar and Heath, 2007).

While our visit to TSM we found the risk of customer dissatisfaction due to the inefficient

services provided to him. They have developed a strategy of risk communication which

is being quite helpful in satisfying the customer or at least reducing the complaints. Prior

to giving service they communicate the possible risks and technical information to the

customer. They also communicate the possible delay in time. This helps in reducing the

resistance from customer. Such customers who are informed about the risks and

technical difficulties become ready to accept the risk. The author wrote about the

successful risk communication which is being followed in TSM and also it has been

quite helpful for the company.

How risk is managed varies greatly depending on who is making the decision and what

forces are interacting in the decision process. (Peter F. Drucker, Management: Tasks,

Responsibilities, Practices, p. 515)

In critical situations sometimes it happens that the technician do no inform the manager

about the problems which may be because he thinks that the problem would solved by

himself or he himself has not properly checked the problem. Also, sometimes some

technicians inform managers about the problem and properly check the vehicle. If the

technician has taken decision by himself the consequences would be faced by him. In

such case the loss would be faced by the technician or the responsible person. But in

case the technician has not taken the decision himself and informed the manager. In

this case decision taken by managers the risk is for the company and the outcomes

would be faced by the company.

Falconer (2002), for example, concludes that risk data presented to managers to help

risk-related decision-making needs to be quickly and easily assimilated.

In TSM the customer feedback is updated on daily bases. The data and information

provided by customers are presented to managers. The managers analyze the flaws in

their services and the level of complaints from customer. Also, the list of possible risks

is provided to manager to inform about possible future outcomes. Manager takes

decision by analyzing this data to reduce or avoid risk. They continuously strive for

reducing the complaints from customers. The employees make monthly reports which

include all the information like, inquiries, complaints, warranty claims, etc. This report is

forwarded to Indus Motors Company Karachi. By this report IMC analyze the service

standard of the dealership and its performance.

The overall performance and service standards of the company are up to the mark. The

customer satisfaction level is also very good. There is a huge customer database
available in the company. The company properly follow-up its customers and improve

its service standards on the continual bases.

Above all those claims there are some major flaws in the company which is a bigger

question mark on its image. Their customer satisfaction level is very impressive, but

while our visit to the company we analyzed that most of the forms of CSI and SSI are

filled by the employees not customer. This means that the customer satisfaction level is

based on the information which is not authentic. So it is hard to tell what the real

customer satisfaction level is. They have also adopted a strategy to ask the customer

on the spot (at the time of delivery) to check the flaws and problems in the vehicle and

our provided service. Also, customer is asked to provide his feedback on the spot, by

doing this they think that they are reducing the dissatisfaction level of the customer. But,

doing this they are only reducing the chances of complaints from the customers.

Because customer is not complaining does not really means that he or she is satisfied.

Suggestions

After analyzing the whole case we have concluded that there are a lot of issues and

customers are very much tired of generating complaints. So there are some

suggestions that Toyota Sahara must adopt:

 Skilled Staff

While dealing with a vehicle that is to be painted they face issues regarding match of

newly painted part and rest of the color of vehicle. So they must possess skilled labor
that is highly trained in painting section, they must be having knowledge and ability to fix

every kind of problem. Or they could also communicate the customer before taking the

responsibility that the color of car is dull due to its old age and newly painted part will

not exactly match the rest of the color of vehicle.

 Claim What they Possess

In problem section we have mentioned the real time scenario of car wash in which

company has claimed for full car wash but they are not having car lifter in car wash bay.

So they must be careful while campaigning and offering those things that could be

fulfilled. Ultimately risk of complaints and customer dissatisfaction will be reduced.

 Trained Personnel to Handle Resistant Customers

As we have disclosed that during our survey we found that the company faces the risk

of having unhealthy and unnecessary complaints by resistant customers. So company

must allot trained personnel to handle such customers. The employee must have

experience and expertise in handling such customers by delighting them. The employee

can do so by greeting such customer, offering tea or cold drink and providing the

customer with comfortable environment.

 Customer Involvement

In services customer always helps in production. So the company must communicate

necessary information to the customer before taking the responsibility of vehicle. For

example they could communicate to customer that” your vehicle delivery might go late
due to load shading” or “your car’s bumper will require compound in order to match the

color with rest of the vehicle and that will include extra charges”.