Background and Overview of Toyota
Discuss about the Influencing Factors of Private Purchasing.
The aim of the report is to provide an overview on the introduction to management for Toyota. The company is a multinational manufacturer of automobiles with its headquarters in Japan (toyota.com.sg, 2018). Found in the year 1937, the company is fifth largest in the world in terms of the revenue and has corporate structure with close to 364, 445 across the world. Toyota is also the first manufacturer of automobile across the world producing over ten million vehicles every year. Toyota leads the market in terms of the sale of the hybrid electric vehicles and encourages mass adoption of the hybrid vehicles worldwide. Toyota also is the largest seller of the vehicles run by Hydrogen fuel cell whose global sales reached a milestone of 10 million in the year 2017. The report will put forward a PESTEL analysis to analyze the macro environment of the industry in which Toyota operates. There is also the mention of the Porter’s five forces for determining the competitive environment of Toyota. The report also puts forward necessary recommendations that would bring back customer’s reliance on the company.
Toyota is subjected to the influence of the political conditions. Therefore, the major political factor that influences the macro environment of the company includes (Dunning, 2014):
- The free trade agreements
- Persistence of the political stability in the major markets
- 3 Support of the government for the eco friendly products
The existence of the political stability in major markets acts as opportunity for the company for growing with minimum political tension. The free trade agreement between Japan and the other countries acts as opportunities for better penetration into the market. Further, the governmental support for eco friendly products also acts as opportunities for Toyota in improving the products for exceeding or satisfying the environmental expectations (Knoke, 2018). Thus, the political factors act as opportunities for business.
The economic trends help in influencing the organizational development of the company. The major external economic factor that influences the macro environment of Toyota includes (Schaltegge & Wagner, 2017):
- Weaker currency, Yen was weaker than the US Dollar
- The growth of the economy of the United States
- The faster growth taking place in the developing countries
The company can improve the exports from the Japan based on the weakness of the Japanese currency Yen. Toyota can expand its business due to the growth of the economy of US that represent the second biggest market of the firm after Japan (Shenkar, Luo & Chi, 2014). There is lies an opportunity for Toyota for improving its revenues due to the rapid growth in the developing economies. The primary economic factors thus help in creation of the opportunities for the business growth.
PESTEL Analysis of Toyota
The primary social factors that influence the macro environment of Toyota include (Fujiwara & Nagasawa, 2015):
- Enhanced interest in the hybrid cars
- Enhanced interest in the electric cars
- Widening gap of the wealth
Toyota experiences an opportunity in providing increased number of products that helps in satisfying the enhanced customers’ interest for the electric and hybrid vehicles (Cherubini, Iasevoli & Michelini, 2015). the company must however, take into account the broadening wealth gap that acts as threat as it corresponded to the diminishing middle class that acted as the primary source of revenue for the company. Hence, the increasing wealth gap serves as a key concern for the company.
The notable external technological factors influencing the macro environment of the company’s business include (Sierzchula, 2014):
- The increasing use of the e-commerce
- The increasing trend of mobile technology
- The presence of the cybercrime (threat)
Toyota can exploit the opportunity of improving the e-commerce capabilities or take advantage of e-commerce service contributor belonging to the third party for the enhancing the sales of its spare parts (Wang, Wang & Hao, 2013). The company also have opportunity of enhancing the mobile apps for increasing the customer loyalty and engagement however; it should consider the cyber crime threat including corporate cyber espionage. Thus, the technological dimension offers various opportunities to the firm but Toyota must resort to high-end security measures for addressing the threats related to the cybercrime.
The primary external environmental factor that influences the macro environment of the company includes (Lasserre, 2017):
- Change in the Climate
- Reduction in the reserves of the global oil
- Increased emphasis on maintenance of sustainability of the business sustainability
Toyota brings in opportunities for providing increased number of products that are environmentally friendly that includes the electric cars with higher efficiency of fuel (Vasconcellos, 2014). The company also possess the opportunity in increasing the sustainability performance by improving the efficiency in the business process. The key environmental factors acts as opportunities for the company thereby enhancing its further growth.
Legal Factors
The most important external legal factors that influence the macro-environment of Toyota’s business include (Law, 2017):
- Presence of improved intellectual property law
- Presence of the environmental laws which are complex
- Presence of complicated consumer laws
Toyota experiences the opportunity in growing with reduced concerns regarding the infringement of the rights of intellectual property since the government works towards improvement in the protection of the intellectual property (Hoskisson et al., 2013). The company also experiences an opportunity in providing higher product quality for exceeding or satisfying requirements depending on the environmental law. Further, the company can also exploit the opportunity of providing greater satisfactory products for fulfilling or exceeding the customer laws. Thus, the external legal factors offer opportunities for the company.
The suppliers of Toyota aim at influencing the firm in improving the business (Porter & Heppelmann, 2014). The external factors that contribute to bargaining power of the suppliers in the automobile industry are as follows:
- Population of the suppliers at the moderate level which acts as moderate force
- Overall higher supply that acts as weaker force
- Forward Integration of the Suppliers at a lower level that acts as weaker force
Porter’s Five Forces Analysis of Toyota
The limitation in the population of the suppliers across the world leads to the creation of moderate force that helps in influencing Toyota (Ruigrok & Van, 2013). Ideally, with fewer suppliers the bargaining power is always higher. Nevertheless, the higher supply availability required for the manufacture of the products of Toyota weakens the power of the suppliers. Further most of the suppliers belonging to the automotive industry on a global scale do possess integration, control or the ownership of the distributed materials that reaches the Toyota firms
The customers of Toyota directly affect business through the revenues. The external factors that act as the contributors towards determining stronger force in Toyota include (Caniels, Gehrsitz & Semeijn, 2013):
- Lower switching costs that acts as stronger force
- Higher quality of the information which acts as strong force
- Moderate availability of the substitutes which acts as moderate force
The lower cost of switching costs implies that the customers can move easily and ensure a change from the Toyota towards the competing firms without any additional cost (Gereffi & Lee, 2016). This change is visible when the customers are buying a newer car. The customers of Toyota can also opt for the best option due to the access of the accurate information about the product through the websites. However, in spite of the availability of the substitutes, the cars made by Toyota are class apart in terms of the convenience. Nevertheless, Toyota should ensure that the products offered must match the expectations and preferences of the targeted customers.
The external factors that act as the primary contributor towards the creation of a moderate force for the automobile industry include (Tilton, 2015):
- Lower cost of switching which acts as stronger force
- Availability of substitutes at the moderate level that acts as moderate force
- Lower convenience in the usage of the substitutes that acts as weaker force
The customers can easily make a shift from the Toyota towards its substitutes. The substitutes of Toyota include bicycles, public transportation, and other transportation modes. Such substitutes however remain available on a moderate scale (Nag, Han & Yao, 2014). In certain suburban areas, public transportation does not remain readily available there implying the absence of substitutes for Toyota. In most of the cases the substitute remain lesser convenient in comparison to the Toyota products. Thus, Toyota experiences moderate threat from it substitute that the company must address by making the product affordable, accessible and convenient.
The external factor that contributes to the weaker force in the automobile industry includes:
- Higher cost of the capital that acts as a weaker force
- Higher cost of development of the brand which acts as a weaker force
- Higher cost of the supply chain that acts as a weaker force
The company faces weaker threats from the newer entrants. The higher costs involving the establishment, maintenance and growth of a new firm in the industry acts as key barriers to entry (Christensen, Raynor & McDonald, 2015). Such barriers enables in weakening the impacts of the new entrants for Toyota. Thus, threat of the new entrants is least for the company and hence it can grow its business and ensure maintenance of its positions as the top automotive manufacturers across the world.
Recommendations
Toyota faces a stronger force of the competition. The external factors that act as key contributors in creation of a stronger force towards a competitive rivalry in the industry include:
- Higher aggressiveness of the firm that acts as strong force
- Higher differentiation and variety of the firm acting as a strong force
- Presence of a lower number of the larger firms that acts as moderate force
The automotive firms act in an aggressive manner against one another in relation to the factors of marketing and innovation (Hashmi & Biesebroec, 2016). Toyota faces competition from huge firms that remain differentiated via the fuel efficiency, electronics, cost, brand image, variety and style. Therefore, the company must adopt comprehensive strategies for addressing the stronger force of the competitive rivalry.
The biggest problem faced by Toyota in recent times is the damage of its reputation caused due to the abrupt acceleration recalls, massive settlement and lawsuit and the millions of money paid in the government fines. In addition to this, the company for a long time had a long list of boring cars (Dunning, 2014). This was making the people lose confidence in buying Toyota cars.
Three recommended strategies would help the company in regaining its position. These included portrayal of a public apology, put forward a prepaid maintenance plan and execution of emergency protocol (Lasserre, 2017).
Toyota represents a picture of reliability and represented the only automobile company that maintained its position for a substantial time. However, the recent issues that had led to the loss of the public confidence is regained with the help of the first recommendation that implied on running an apology commercial on different stations during the prime time (Hashmi & Biesebroeck, 2016). The commercials would continue for a month and should air once on a day-to-day basis. The company could also undertake a video streaming on its website that would contain a ten-second apology from the company president stating the measures that the company is adopting in regaining trust.
The second recommendation for the company included the offering of a prepaid maintenance plan for the vehicles that ran over certain time (Knoke, 2018). This particular servicing plan would enable the makers of Toyota to take their cars to any existing auto shop and get it repaired. This would keep the inconvenience of car owners at bay.
The final recommendation related to the implementation of an emergency protocol. This would allow the company in bringing the car and investing its problem (Law, 2017). On identification of an issue, the company should either send a notification to the customers via phone call or letter which will also in updating them.
Political Factors
Conclusion:
The report concludes by throwing a light on the management aspects of Toyota. The report put forward a PESTEL analysis of the company. It is seen that the identified external factors put forward opportunities for Toyota. For example, the opportunities enable the firm in focusing on the product development through exploitation of the market opportunities. The report discusses about the Porters five forces that help in determining the position of the company. There are recommendations portraying how the company can regain its trust amongst the consumers.
References:
Caniels, M.C., Gehrsitz, M.H. & Semeijn, J. (2013). Participation of suppliers in greening supply chains: An empirical analysis of German automotive suppliers. Journal of Purchasing and supply management, 19(3), pp.134-143.
Cherubini, S., Iasevoli, G. & Michelini, L. ( 2015). Product-service systems in the electric car industry: critical success factors in marketing. Journal of Cleaner Production, 97, pp.40-49.
Christensen, C.M., Raynor, M.E. & McDonald, R.(2015). What is disruptive innovation. Harvard Business Review, 93(12), pp.44-53.
Dunning, J.H. (2014). The Globalization of Business (Routledge Revivals): The Challenge of the 1990s. Routledge.
Fujiwara, K. & Nagasawa, S.Y. (2015) Analysis of psychological factors that influence preference for luxury food and car brands targeting Japanese people. American Journal of Industrial and Business Management, 5(09), p.590.
Gereffi, G. & Lee, J. (2016). Economic and social upgrading in global value chains and industrial clusters: Why governance matters. Journal of Business Ethics, 133(1), pp.25-38.
Hashmi, A.R. & Biesebroeck, J.V. (2016). The relationship between market structure and innovation in industry equilibrium: a case study of the global automobile industry. Review of Economics and Statistics, 98(1), pp.192-208.
Hoskisson, R.E., Wright, M., Filatotchev, I. & Peng, M.W. (2013). Emerging multinationals from mid?range economies: The influence of institutions and factor markets. Journal of Management Studies, 50(7), pp.1295-1321.
Knoke, D. ( 2018). Changing organizations: Business networks in the new political economy. Routledge.
Lasserre, P.(2017). Global strategic management. Macmillan International Higher Education.
Law, C.M. (2017). Restructuring the global automobile industry(Vol. 4). Taylor & Francis.
Nag, B., Han, C & Yao, D.Q.(2014). Mapping supply chain strategy: an industry analysis. Journal of Manufacturing Technology Management, 25(3), pp.351-370.
Porter, M.E. & Heppelmann, J.E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.
Ruigrok, W. & Van Tulder, R. (2013). The logic of international restructuring: The management of dependencies in rival industrial complexes. Routledge.
Schaltegger, S. & Wagner, M. eds. (2017). Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.
Shenkar, O., Luo, Y. & Chi, T. (2014). International business. Routledge.
Sierzchula, W.(2014). Factors influencing fleet manager adoption of electric vehicles. Transportation Research Part D: Transport and Environment, 31, pp.126-134.
Tilton, J.E. ed. (2015). Material substitution: lessons from tin-using industries. Routledge.
toyota.com.sg (2018). [online] Available at: https://www.toyota.com.sg/ [Accessed 23 May 2018]
Vasconcellos, E.A. (2014). Urban Transport Environment and Equity: The case for developing countries. Routledge.
Wang, Z., Wang, C. & Hao, Y. (2013). Influencing factors of private purchasing intentions of new energy vehicles in China. Journal of Renewable and Sustainable Energy, 5(6), p.063133.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
