Toyota
Content
Strategic Analysis and Implementation
For
TOYOTA Motor Company
Student
:
Riyad Batal
NCC ID
:
00153816
Module
:
Strategic Management
Center Name:
MMS Education Center
Date
:
DEC 12, 2014
1
Contents
Introduction
Task 1
4
4
Political
4
Economic
5
Social
5
Technological
6
Threats
7
Opportunity
7
Task 2
8
Strengths
8
Weakness
9
Resource Audit
9
Value Chain Analysis
10
Core Competence
11
Strategic Capability
11
Competitive Advantage
Task 3
12
Introduction
12
st
1 issue is Low price
nd
2
rd
11
12
issue is Environment
3 issue is Social
13
12
Task 4
14
References
2
16
Bibliography
17
List of Figures
Figure 1 :Value Chain analysis
10
3
Introduction
The great Japanese automaker company Toyota Motor Corporation TMC is one of the best
leading car producers in the world, it holds a large range of vehicles from mini-sized cars to big
large trucks and buses, it is well known and sold in a lot of countries around the world hiring
thousands of employees.
Their name is among the world’s strongest car production manufacturers because they believe as
Japanese that improvement in things must be running continuously through their lifestyle.
Toyota is a multinational company with factories all around the world, assembles and produces
vehicles in local markets, Toyota Motor Europe TME assembles and manufactures in many
countries in Europe such as United Kingdom, Czech Republic, France, Poland and others helping
the company sales increase year by year. (www.toyota.eu, 2010)
It has become a popular manufactures in Europe following the strategy of focusing on small cars
segment with its high demand because of the fuel high price, environment, high unemployment
and an unstable economy.
Task 1
There a number of factors that could affect organizations, these factors affect on the firm’s
environment internally and externally.
Environmental analysis comes in internal analysis that concerns stuff like employees, finance,
office technologies and so on. The external analysis comes in micro and macro environment,
micro such as costumers, supplies, distributers and competitors and macro such as political,
economic, social and technological forces. And that is known as PEST analysis. (NCC lecture)
PEST analysis is a very helpful and useful analysis tool to help understand losses or growths of a
specific market concentrating on the Political, Economical, Social and Technological factors of
the business. PEST is very useful to show the benefits and available opportunities for the
business itself.
Political
The Political factor is so important for the multinational companies, such as Toyota, because it
will guide the company to understand the country specific requirements, regulations, security
measures, restrictions and policies. It has huge influence on the businesses regulations and how
much will the consumers spend. (ukessays.com, 2009)
Any recent produced cars must comply with the European vehicle emission standards and
regulations this is known as Euro Standards, therefore, Hybrid or small engine cars with lower
CO2 emissions has big demand and support from the government because it is friendly to the
environment also vehicles with high CO2 emission will have higher rates of TAX charges.
4
This industry in Europe faced strong regulations to make high mileage cars while increasing the
automobile productions and sales. (academia.edu, PEST Analysis)
Renewable energy is aimed by the Government Policy to decrease dependence on foreign oil
which will affect on the country’s security and economy due to the oil price raising.
Surely, with the mentioned above, the political environment is stable for Toyota, because it
makes cars with low CO2 emissions and longer mileage which would reduce petrol usage also
because this industry is enormous, therefore Toyota has a positive political impact because it
makes cars that use less fuel and reduce dependency on fuel.
Economic
Economic factors influences on an organization’s development and growth and affects on the
consumers demand, they need to concentrate on the trading economy in the short and long terms.
The consumers now choose cars with smaller efficient engines based on the benefits of fuel
consumption and the savings over time which means they have paid back. Recently the prices of
automobiles has increased due to inflation, the main factor that affect on price elasticity is from
the oil dependency, customers came aware of new cars with efficient engines which causes
saving money in terms of giving bigger mileage for the same amount of oil they could spent on
older cars.
The dependency on foreign oil and gas will affect on the country’s economy growth, Gross
Demotic Product GDP and national security. Previously, the Europe Union had an agreement for
quota system, which provides protectionism for European countries, later on they dropped the
quota system and eased the tariffs for the external company which made it easier for many
international companies including Toyota to trade in Europe and establish opening factories,
which has lead to positively affect on decreasing the unemployment rate and the economic
growth. (Choon Keet Sin, PESTLE Analysis on Toyota Prius)
Social
The society environment plays a good part on the type of cars people buy and fuel efficiency in
the car in terms of being green and mileage, the social factor is a change in consumer needs in
the society, it affects on business is different from country to another, they should be considered.
The challenge for Toyota is the difference between the Japanese customers and European
customers, where in Japan there is all about working, where in European culture life is all about
both work and social private life. The Japanese culture aspect is that they only take what they
need not what they want, without wasting their energy and time on things they wouldn’t need,
following “just in time” production just like what Toyota supports. (ukessays.com, 2009)
5
People are able to communicate overseas more easily nowadays because of the social value of an
additional transportation which has come from this industry, Toyota has come up with new
strategy of making cars specifically to target at European consumer.
Toyota employs a lot of people in a direct manner and a lot more indirectly which shows how it
affects on the society in a major way.
TME has made its products for green and small cars segment in Europe, which aims to keep the
world in a clean environment and save the natural resources of the world focusing on providing
acceptable social costs for European countries (www.Toyota.eu)
In Europe TME conducts seminars and campaigns to introduce environmental issues such tips on
ECO DRIVE, an economical driving style with cooperating with social communities and NGOs
to be involved with the Europeans mentality on saving the environment. (www.Toyota.eu,
Sustainability Report 2012)
Technological
Nowadays the technology factor is a main driver of globalization and it is important for the
competitive advantage, the automobile manufacturing industry should concentrate on it, because
of the high competition among the European manufacturers, technology changes from time to
another. The TME concentrates on this factor for all its processes, products, operations and
others.
One of the major technology strategies for TME is reducing CO2 emissions and innovate new
alternative fuel such as electric motors and hybrid engines also reduce the air pollution, therefore
TME is a great example for providing an environment-friendly cars. (www.Toyota.eu,
Sustainability Report 2012)
Technology solutions is the investment of today to get benefits for tomorrow, Toyota does not
focus on producing fast cars yet it focuses on Eco-friendly cars in Europe, they are researching
for alternative energy resources such as Hydrogen, Natural gas, Electricity and Bio fuels.
(Toyota.eu, Sustainability Report 2012).
Toyota produced Prius with a great Engine technology especially for Europe, which focuses on
small engines with the ability to generate higher outputs and using aerodynamic technology for a
smother air friction which will decrease the engine efforts and fuel consumption so it achieves
low emissions throughout all area. (Choon Keet Sin, PESTLE Analysis on Toyota Prius)
The car manufacturing industry in Europe is very competitive technologically where the greatest
car manufactures in the industry have cutting edge in science, such as Audi, BMW, Mercedes,
Jaguar and others which made it a difficult competition for Toyota and a big challenge for
achieving Toyota strategy in technology.
6
Finally TME must concentrate on green cars it has a huge demand in future and in the European
market maintaining the technological, economical and socio environmental factor with
accordance to the European standards.
Threats
Global competition in the automotive industry has become highly competitive because of the
globalization, the competition which may reduce sales which could influence financial condition
of a company. (Slide share, 2013, Toyota Analysis)
The competition is the main threat for the TME especially in the crowded market for Europe and
the Korean motor opened a factory in Europe which makes it a foreigner competitor that leads
TME to make joint venture with Citroen and Peugeot in manufacturing the Aygo. (Slide share,
2013, Toyota Analysis)
Another factor that threats TME are the Emission Restriction the probability of tightening or
imposing new European emission standard that may increase the cost for product testing and
manufacturing operation and it will be affected on the Toyota production reducing, however
TME meets with the regulatory requirements of CO2 emissions.
(strategicmanagementinsight.com, 2013, SWOT analyses)
The economic recession is one of the most dangerous factors for the automotive industry in
Europe. The cost of production may affect on many reasons such as pricing of the raw material
and steel. The financial crisis which also affects negatively on the fuel price elasticity which
threatens the production.
Opportunity
Nowadays one the main environmental problems is climate change and air pollution, customers
looking for products which aim to save the environment which is the best opportunity for TME
to implement green cars using alternative resources such as, electricity and hybrid engines to
reduce CO2 emission to meet the costumers needs and show the society responsibility. (Slide
share, 2013, Toyota Analysis).
Europe has many manufacturers seeking the same vision and responsibility as TME, with the
existence of the products and market in Europe as per Ansoffs matrix which is to implement
market penetration by making joint venture and strategic alliance giving a good opportunity to
produce cars in Europe and develop supplied network to locate any future plants.
As mentioned previously in PEST analyses, one of the best opportunities is to match mini cars
segment which meets costumer needs in saving the environment and the economy. TME must
innovate products specifically for this segmentation because of high unemployment rate, rising
fuel price and economy uncertainty in Europe.
7
Task 2
Internal environment analysis for an organization is one of the basic analyses to make a strategy,
it measures the power of a company and its whereabouts by finding out the strength and
weakness factors then set the goals and objectives for the organization depending on results of
the environment analyses and formulating the strategy to implement.
Strengths
Toyota is a world leading company with a strong brand position in the automotive industry
globally, with a large number worldwide in the car sales, it has strong financial backbone, strong
distribution networks which helps Toyota to improve their sales and market positions around the
world.
Toyota has different products with different segments for costumers which meet the needs of
customers from all levels with the high production lines which gives Toyota its good reputation
and brand image that reflects positively on the competitive advantage.
Its products are famous with value cost, quality, durability, and reliability and environmentally
safe which gives it the strength throughout Europe market.
By innovating hybrid cars and high fuel efficiency engines and produce cars specifically to meet
Europe standards with reducing air pollution and CO2 emissions, gaining competitive advantage
among the automotive industry in Europe while possessing the society loyalty by keeping the
environment green and saving economy through reducing fuel consumption. (www.Toyota.eu,
Sustainability Report 2012).
One of the strong factors for TME is the innovation of cooperation with European car
manufacturers Peugeot and Citroen with a clever strategic alliance to manufacture the car Aygo
specifically for Europe that gives the power of purchasing in the market share and added value
for the company, with a reduced cost of courier and lowering the exchange rates also by sharing
manufacturing parts alongside gaining from the sharing of knowledge and local experience.
(www.Toyota.eu).
TME has succeeded in advertising and promoting with showing their core competence and the
company strategy for safe environment by supporting volunteered initiatives through NGOs to
share awareness of ECO Driving steps under corporate society responsibility programs and
activities. (www.Toyota.eu, Sustainability Report 2012).
8
Weakness
In recent years Toyota faced design engineering problems which was one of the weakness factors
that has challenged Toyota manufacturing is not having high technical skills of engineering
designs when they have high level of skills in production.
When Toyota faced lapses in product quality it is announced to recall millions of cars around the
world from the most popular models which were affected on the market share and reduced the
share prices not only for that but also affected on the brand image for costumer and shook
costumer’s confidence. (Slide share, 2013, Toyota Analysis)
When Toyota decided to enter the European market they had lack of experience among the
European competitors especially with suppliers and new young segment of costumers. Also it is
such a strange investment which made it look as an interrupter from the local’s point of view,
given it has overcome this issue but it is still not counted as proud European manufacturer like its
rivals.
Resource Audit
Most parts of Toyota cars production is outsourced, it makes standards for their production and
get it from various specialized manufacturers such as, tires, glasses, water pumps, so it helps take
a lot lesser time in production and makes better product quality, it has physical plants and assets
around the world.
They use resources to generate competences which is applied in their strategies and competitive
advantage also integrate technological resources and the capital in machines so it makes
competence in production to contribute in a sustainable competitive advantage.(study mode.com,
2013, Resources and Capabilities of Toyota)
Toyota has strong capabilities in human resources, intellectual capital, learning and knowledge
management, they share and train their suppliers along with their staff to maintain their core
competence.
9
Value Chain Analysis
Figure 1 :Value Chain analysis
(mekogroup.com, value chain)
For primary activities:Inbound: The company almost obtain raw material from third party, they also handle small parts
not manufacture, and keep good relationship with their suppliers.
Operation: Toyota is properly manufactured and assembled, it is known for its reliability and
durability thanks to the efficient operations.
Outbound: They store and distribute their finished products to dealers to make them easily
reachable.
Marketing & sale: They focus importantly on marketing and the promotions variations to meet
what the targeted customers need.
Service: Toyota appreciates and gives value to their customers, so after-sale, maintenance and
other services are included. (scribd.com,2009,Value Chain Analysis)
For support activity:Infrastructure: Toyota handles and controls its different departments by Management Information
System and other systems.
Human Resource: Toyota values their employees as Human Capital, they aim to maintain their
employees by training and developments.
Procurement: It aims to reduce the prices for purchasing with the most possible quality and they
use e-Purchasing.
10
Technology: Toyota implements production technology and innovate to reduce cost by using
internet activities and other technological developments. (scribd.com,2009,Value Chain
Analysis)
Core Competence
Toyota is rich in core competence which is high professional skills in management, high
technology and knowledge with good relationship with competitive. It has high capabilities that
give it high performance and production which made it distinct among competitors.
The company is looking for unique product which is recognized by its ability to manufacture
cars with great quality and best prices to meet costumer high expectations.
With continues improvements in the Japanese word KAIZEN Toyota distinct in continuously
advancing in production, it has just in time production which give it high efficiency in
production. (www.Toyota.eu, Sustainability Report 2012).
Strategic Capability
Toyota is a company with strong management capabilities that makes it to increase its value with
time, with high ability to use competitive strategies successfully by focusing on assets and
resources and market position.
It has the ability to use their strategy for the future globally; it has successful management
capability in Europe especially when they employ their capabilities and resources to meet
standards for Europe in a challenging market. (Toyota.eu, Sustainability Report 2012).
Competitive Advantage
The competition in the automobile industry is strong in Europe, TME faces big players to
compete with, it is struggling to increase its market share.
It creates a unique brand image in the mind of the targeted costumers which is an advantage over
the competitors. The company always keeps an eye out on their competitors with continuously
improving quality and low cost.
TME has accomplished a great achievement of the mini cars targeted segmentation, especially
with less fuel consumption and low price in the Aygo and Prius.( Slide Share.com, 2013, Report
on Corporate Level Strategies)
It has created a competitive edge over costumers to keep them satisfied by developing and
implementing their core competence and capability.
11
Task 3
Introduction
As mentioned previously on the environmental analysis for the internal and external factors it
appears that Toyota is a one company that cannot be underestimated and is considered a huge
competitor for automobile companies in the industry.
It focuses mainly on being known to be low in price with good quality among its competitors,
environment friendly is considered one of the major strategies for Toyota, especially in Europe,
globally expanding all over the world, adapting with many cultures and take societies needs,
without neglecting the cutting edge of technology.
st
1 issue is Low price
Toyota mainly adopts low cost strategy as one of its competitive advantages they are focusing on
reducing cost for all supply chain management starting from suppliers and resources of raw
materials during operation to sales, logistics and capabilities in overall, when all other
competitors focusing on reducing the cost Toyota achieved leadership in low cost production.
(www.Toyota.eu, Sustainability Report 2012).
Toyota should adopt competitive strategy in Europe by implementing low cost leadership
strategy.
Low cost leadership occurs by Toyota having their own channel of raw material suppliers to
avoid fluctuation increase from the suppliers, redesigning of component process to save
sustainable cost.
They needed to be careful to make a decision to having assets and insuring those assets are fully
used, low cost of product design, engineering and a skilled workforce.
Low cost is a main interest of the targeted customers because of the economy uncertainty,
increasing fuel prices and high unemployment rate in Europe, given this it makes it an
appropriate strategy.
nd
2
issue is Environment
Another corporate strategy for Toyota is to save the environment and keep the environment green
by reducing emissions CO2, less fuel efficiency and innovate hybrid car with electric motors.
(www.Toyota.eu, Sustainability Report 2012).
For this issue, the best strategy the differentiation, increase market share with changing the
costumer’s perception for Toyota products as a competitive car by added value downstream
choosing clever advertising and promotion to view to the costumer the meeting of their needs for
environment responsibility.
12
rd
3 issue is Social
A clever competitive advantage of Toyota is involving with the countries culture, in Europe they
focus on the society awareness of the economical practices to save the economy. They gain more
loyalty of the costumers by dealing with NGOs and involve corporate social responsibility
through social activities. (www.Toyota.eu).
Appropriate strategy for this issue is by adopting social responsibility, one of the good business
ethical practices and showing their care of improving people lives, supporting awareness
campaigns for the society, support charities and education.
This strategy will keep the stakeholders satisfied and give out a positive vision to the world about
Toyota.
13
Task 4
Undoubtedly when the organizations implement their strategies facing problems and barriers,
strong management is the key behind overcoming these barriers, it plans and implements
emergent strategies to flexibly change their approach of achieving their vision.
For Toyota strategies as mentioned previously for implementing low cost leadership strategy
many problems and barriers Toyota might face, some of it is like the ones developing and
improving the quality of technology, and keep up with the modern technology, especially when
they add new electronic systems and sensors.
When the company plans to apply the low cost strategy, that means they will decrease all cost for
all value chain in primary and supportive activities, these will affect directly on the quality of
technology because they will not be encouraged to spend more money for research and
development, and support innovation centers which slows down the technology growth in
comparison to the competitors, the new technology production may appear defected that would
force the company to recall the defected cars which will lead to losing customers trust and
reputation, and society loyalty.
Other problems that may face the low cost leadership strategy is price increase of raw materials
and suppliers over-controlling the prices, forcing the company to raise their product cost
affecting its known reputation of value of money.
Also currency exchange rates in the scale of economy between company, suppliers and
distributers may also make Europe increase the taxes rates for the foreigner markets, and making
inappropriate advertising and promotions to the society.
The company should keep its prices low for this strategy and adopt operational strategies to
maintain capability and resources for appropriate prices. The implementation strategy should be
flexible and emergent perspective in action plans which deals with all emergent cases that
becomes a barrier of implementing the strategy.
Suggestion for the low cost strategy, to keep technology growing with low expenses is to
encourage younger people, invest and support innovation in schools and social groups and award
the young learners by making technological competitions whom wages come lesser than the
experienced ones, generating new ideas from the young minds.
14
For suppliers it should seek out joint venture and strategic alliance opportunities and invest with
suppliers and share the stocks to contribute with the suppliers decision.
The strategies should be focused on the operational performance objectives quality, speed,
dependability, flexibility and cost to create competitive products with achieving organization
goals without neglecting any safety and technology.
15
References
PEST Analysis on the Automobile Industry. [Online] Available from:
www.academia.edu/7033015/PEST_Analysis_on_the_automobile_industry [Accessed Oct,2014]
rd
Bob De Wit and Ron Meyer (2004), Strategy, Process, Content, Context 3 edn. London,
England. Thombson Learning.
Meko Group, Value Chain [Online] Available From;
www.mekogroup.com/Services/Value_Chain.html [Accessed Oct, 2014]
NCC, Strtegic Management Lecture 2. Manchester, UK. NCC Education Limited.
PESTLE Analysis on Toyota Prius. [Online] Available from:
www.academia.edu/2064315/PESTLE_Analysis_on_Toyota_Prius [Accessed Oct, 2014]
Scribd, (Nov 2009) Value Chain Analyysis of Toyota Co. [Online] Available from:
http://www.scribd.com/doc/22372540/Value-Chain-Analysis-of-Toyota-Co [Accessed Oct 2014]
Share (Oct 2013), Strategic Management Toyota Case Study. [Onlilne] Available from:
www.slideshare.net/ArioArdianto/strategic-management-toyota-case-study [Accessed Oct 2014]
Slide Share (Mar 2013), Toyota: Analysis of Vision Statement, Corporate Level Strategies &
SWOT, [Online] Available from: http://www.slideshare.net/rohannegi/toyota-analysis-of-visionstatement-corporate-level- strategies-swot [Accessed Oct 2014]
Slide Share (Mar 2013), Report on Corporate Level Strategies of "Toyota" [Online] Available
from: www.slideshare.net/rohannegi/toyota-analysis-of-vision-statement- corporate-levelstrategies-swot [Accessed Oct 2014]
Study Mode (Dec 2013), Corporate Strategy of Toyota [Online] Available from:
http://www.studymode.com/essays/Corporate-Strategy-Of-Toyota-45808935.html [Accessed Oct
2014]
Study Mode (Feb 2013), Resources and Capibilities of Toyota. [Online] Avaialble from:
www.studymode.com/essays/Resources-And-Capibilities-Of-Toyota-1464747.html [Accessed
Oct 2014]
Strategic Management Insight (Feb 2013), SWOT analysis of Toyota, [Online] Available from:
http://www.strategicmanagementinsight.com/swot-analyses/toyota-swot- analysis.html
[Accessed Oct 2014]
Toyota Company (2010), Toyota Motor Europe Corporate Site [Online] Available from:
http://www.toyota.eu/about/Pages/heritage.aspx?cat=6 [Accessed Oct 2014]
Toyota Company (2012), Toyota European Sustainablity Report 2012 [Online] Available from:
http://www.toyota.eu/SUSTAINABILITY/Pages/default.aspx [Accessed Oct 2014]
UK Essays (2009), PESTEL analysis of automobile company Toyota, [Online] Available from:
http://www.ukessays.com/essays/marketing/pestel-analysis-of-automobile- company-toyotamarketing-essay.php [Accessed Oct 2014]
UK Essays, Value Chain Analysis Focus On Toyota Motor Thailand Marketing Essay, [Online]
Available from: http://www.ukessays.com/essays/marketing/value-chain - analysis-focus-on-toyotamotor-thailand-marketing-essay.php [Accessed Oct 2014]
16
Bibliography
Bob De Wit and Ron Meyer (1998), Strategy, Process, Content, Context 2
England. Thombson Learning.
nd
edn. London,
Business New Daily (Feb 2014), What is Corporate Social Responsibility? [Online] Available
from. http://www.businessnewsdaily.com/4679-corporate-social- responsibility.html [accessed
Oct, 2014].
Green Car Congress (Nov 2014), Toyota brining vehicle-infrastructure coopreative systems to
some new models in Japan 2015. [Online] Available from:
www.greencarcongress.com/2014/11/20141126-toyotav2x.html [Accessed Oct 2014]
Henry Mintzberg, Bruce Ahlstrand and Oseph Lampel (2005), Strategy Safari. New York, NY.
Free Press.
Nigel Slack, Stuart Champers and Robert Johnston (2007), Operations Management 5th edn.
Essex, England. PEARSON Education Lmited.
OPPAPERS.com, 2012. Analysis Of Ford And The World Automobile Industry In 2007. [Online]
OPPAPERS.com Available at: http://www.oppapers.com/essays/Analysis-Of- Ford-And-TheWorld/629714 [Accessed Oct 2014].
Slack, N, Brandon-Jones, A, Johnston, R & Betts, A (2012) Operations and Process
Management: Principles and Practice for Strategic Impact, 3rd ed. Harlow: Pearson Education.
Word Press (Aug, 2011), What Strategy are you crafting? [Online] Retrieved from:
http://pramodrrao.wordpress.com/2011/08/29/what-strategy-are-you-crafting/ [accessed Sep 19,
2014].
17
For
TOYOTA Motor Company
Student
:
Riyad Batal
NCC ID
:
00153816
Module
:
Strategic Management
Center Name:
MMS Education Center
Date
:
DEC 12, 2014
1
Contents
Introduction
Task 1
4
4
Political
4
Economic
5
Social
5
Technological
6
Threats
7
Opportunity
7
Task 2
8
Strengths
8
Weakness
9
Resource Audit
9
Value Chain Analysis
10
Core Competence
11
Strategic Capability
11
Competitive Advantage
Task 3
12
Introduction
12
st
1 issue is Low price
nd
2
rd
11
12
issue is Environment
3 issue is Social
13
12
Task 4
14
References
2
16
Bibliography
17
List of Figures
Figure 1 :Value Chain analysis
10
3
Introduction
The great Japanese automaker company Toyota Motor Corporation TMC is one of the best
leading car producers in the world, it holds a large range of vehicles from mini-sized cars to big
large trucks and buses, it is well known and sold in a lot of countries around the world hiring
thousands of employees.
Their name is among the world’s strongest car production manufacturers because they believe as
Japanese that improvement in things must be running continuously through their lifestyle.
Toyota is a multinational company with factories all around the world, assembles and produces
vehicles in local markets, Toyota Motor Europe TME assembles and manufactures in many
countries in Europe such as United Kingdom, Czech Republic, France, Poland and others helping
the company sales increase year by year. (www.toyota.eu, 2010)
It has become a popular manufactures in Europe following the strategy of focusing on small cars
segment with its high demand because of the fuel high price, environment, high unemployment
and an unstable economy.
Task 1
There a number of factors that could affect organizations, these factors affect on the firm’s
environment internally and externally.
Environmental analysis comes in internal analysis that concerns stuff like employees, finance,
office technologies and so on. The external analysis comes in micro and macro environment,
micro such as costumers, supplies, distributers and competitors and macro such as political,
economic, social and technological forces. And that is known as PEST analysis. (NCC lecture)
PEST analysis is a very helpful and useful analysis tool to help understand losses or growths of a
specific market concentrating on the Political, Economical, Social and Technological factors of
the business. PEST is very useful to show the benefits and available opportunities for the
business itself.
Political
The Political factor is so important for the multinational companies, such as Toyota, because it
will guide the company to understand the country specific requirements, regulations, security
measures, restrictions and policies. It has huge influence on the businesses regulations and how
much will the consumers spend. (ukessays.com, 2009)
Any recent produced cars must comply with the European vehicle emission standards and
regulations this is known as Euro Standards, therefore, Hybrid or small engine cars with lower
CO2 emissions has big demand and support from the government because it is friendly to the
environment also vehicles with high CO2 emission will have higher rates of TAX charges.
4
This industry in Europe faced strong regulations to make high mileage cars while increasing the
automobile productions and sales. (academia.edu, PEST Analysis)
Renewable energy is aimed by the Government Policy to decrease dependence on foreign oil
which will affect on the country’s security and economy due to the oil price raising.
Surely, with the mentioned above, the political environment is stable for Toyota, because it
makes cars with low CO2 emissions and longer mileage which would reduce petrol usage also
because this industry is enormous, therefore Toyota has a positive political impact because it
makes cars that use less fuel and reduce dependency on fuel.
Economic
Economic factors influences on an organization’s development and growth and affects on the
consumers demand, they need to concentrate on the trading economy in the short and long terms.
The consumers now choose cars with smaller efficient engines based on the benefits of fuel
consumption and the savings over time which means they have paid back. Recently the prices of
automobiles has increased due to inflation, the main factor that affect on price elasticity is from
the oil dependency, customers came aware of new cars with efficient engines which causes
saving money in terms of giving bigger mileage for the same amount of oil they could spent on
older cars.
The dependency on foreign oil and gas will affect on the country’s economy growth, Gross
Demotic Product GDP and national security. Previously, the Europe Union had an agreement for
quota system, which provides protectionism for European countries, later on they dropped the
quota system and eased the tariffs for the external company which made it easier for many
international companies including Toyota to trade in Europe and establish opening factories,
which has lead to positively affect on decreasing the unemployment rate and the economic
growth. (Choon Keet Sin, PESTLE Analysis on Toyota Prius)
Social
The society environment plays a good part on the type of cars people buy and fuel efficiency in
the car in terms of being green and mileage, the social factor is a change in consumer needs in
the society, it affects on business is different from country to another, they should be considered.
The challenge for Toyota is the difference between the Japanese customers and European
customers, where in Japan there is all about working, where in European culture life is all about
both work and social private life. The Japanese culture aspect is that they only take what they
need not what they want, without wasting their energy and time on things they wouldn’t need,
following “just in time” production just like what Toyota supports. (ukessays.com, 2009)
5
People are able to communicate overseas more easily nowadays because of the social value of an
additional transportation which has come from this industry, Toyota has come up with new
strategy of making cars specifically to target at European consumer.
Toyota employs a lot of people in a direct manner and a lot more indirectly which shows how it
affects on the society in a major way.
TME has made its products for green and small cars segment in Europe, which aims to keep the
world in a clean environment and save the natural resources of the world focusing on providing
acceptable social costs for European countries (www.Toyota.eu)
In Europe TME conducts seminars and campaigns to introduce environmental issues such tips on
ECO DRIVE, an economical driving style with cooperating with social communities and NGOs
to be involved with the Europeans mentality on saving the environment. (www.Toyota.eu,
Sustainability Report 2012)
Technological
Nowadays the technology factor is a main driver of globalization and it is important for the
competitive advantage, the automobile manufacturing industry should concentrate on it, because
of the high competition among the European manufacturers, technology changes from time to
another. The TME concentrates on this factor for all its processes, products, operations and
others.
One of the major technology strategies for TME is reducing CO2 emissions and innovate new
alternative fuel such as electric motors and hybrid engines also reduce the air pollution, therefore
TME is a great example for providing an environment-friendly cars. (www.Toyota.eu,
Sustainability Report 2012)
Technology solutions is the investment of today to get benefits for tomorrow, Toyota does not
focus on producing fast cars yet it focuses on Eco-friendly cars in Europe, they are researching
for alternative energy resources such as Hydrogen, Natural gas, Electricity and Bio fuels.
(Toyota.eu, Sustainability Report 2012).
Toyota produced Prius with a great Engine technology especially for Europe, which focuses on
small engines with the ability to generate higher outputs and using aerodynamic technology for a
smother air friction which will decrease the engine efforts and fuel consumption so it achieves
low emissions throughout all area. (Choon Keet Sin, PESTLE Analysis on Toyota Prius)
The car manufacturing industry in Europe is very competitive technologically where the greatest
car manufactures in the industry have cutting edge in science, such as Audi, BMW, Mercedes,
Jaguar and others which made it a difficult competition for Toyota and a big challenge for
achieving Toyota strategy in technology.
6
Finally TME must concentrate on green cars it has a huge demand in future and in the European
market maintaining the technological, economical and socio environmental factor with
accordance to the European standards.
Threats
Global competition in the automotive industry has become highly competitive because of the
globalization, the competition which may reduce sales which could influence financial condition
of a company. (Slide share, 2013, Toyota Analysis)
The competition is the main threat for the TME especially in the crowded market for Europe and
the Korean motor opened a factory in Europe which makes it a foreigner competitor that leads
TME to make joint venture with Citroen and Peugeot in manufacturing the Aygo. (Slide share,
2013, Toyota Analysis)
Another factor that threats TME are the Emission Restriction the probability of tightening or
imposing new European emission standard that may increase the cost for product testing and
manufacturing operation and it will be affected on the Toyota production reducing, however
TME meets with the regulatory requirements of CO2 emissions.
(strategicmanagementinsight.com, 2013, SWOT analyses)
The economic recession is one of the most dangerous factors for the automotive industry in
Europe. The cost of production may affect on many reasons such as pricing of the raw material
and steel. The financial crisis which also affects negatively on the fuel price elasticity which
threatens the production.
Opportunity
Nowadays one the main environmental problems is climate change and air pollution, customers
looking for products which aim to save the environment which is the best opportunity for TME
to implement green cars using alternative resources such as, electricity and hybrid engines to
reduce CO2 emission to meet the costumers needs and show the society responsibility. (Slide
share, 2013, Toyota Analysis).
Europe has many manufacturers seeking the same vision and responsibility as TME, with the
existence of the products and market in Europe as per Ansoffs matrix which is to implement
market penetration by making joint venture and strategic alliance giving a good opportunity to
produce cars in Europe and develop supplied network to locate any future plants.
As mentioned previously in PEST analyses, one of the best opportunities is to match mini cars
segment which meets costumer needs in saving the environment and the economy. TME must
innovate products specifically for this segmentation because of high unemployment rate, rising
fuel price and economy uncertainty in Europe.
7
Task 2
Internal environment analysis for an organization is one of the basic analyses to make a strategy,
it measures the power of a company and its whereabouts by finding out the strength and
weakness factors then set the goals and objectives for the organization depending on results of
the environment analyses and formulating the strategy to implement.
Strengths
Toyota is a world leading company with a strong brand position in the automotive industry
globally, with a large number worldwide in the car sales, it has strong financial backbone, strong
distribution networks which helps Toyota to improve their sales and market positions around the
world.
Toyota has different products with different segments for costumers which meet the needs of
customers from all levels with the high production lines which gives Toyota its good reputation
and brand image that reflects positively on the competitive advantage.
Its products are famous with value cost, quality, durability, and reliability and environmentally
safe which gives it the strength throughout Europe market.
By innovating hybrid cars and high fuel efficiency engines and produce cars specifically to meet
Europe standards with reducing air pollution and CO2 emissions, gaining competitive advantage
among the automotive industry in Europe while possessing the society loyalty by keeping the
environment green and saving economy through reducing fuel consumption. (www.Toyota.eu,
Sustainability Report 2012).
One of the strong factors for TME is the innovation of cooperation with European car
manufacturers Peugeot and Citroen with a clever strategic alliance to manufacture the car Aygo
specifically for Europe that gives the power of purchasing in the market share and added value
for the company, with a reduced cost of courier and lowering the exchange rates also by sharing
manufacturing parts alongside gaining from the sharing of knowledge and local experience.
(www.Toyota.eu).
TME has succeeded in advertising and promoting with showing their core competence and the
company strategy for safe environment by supporting volunteered initiatives through NGOs to
share awareness of ECO Driving steps under corporate society responsibility programs and
activities. (www.Toyota.eu, Sustainability Report 2012).
8
Weakness
In recent years Toyota faced design engineering problems which was one of the weakness factors
that has challenged Toyota manufacturing is not having high technical skills of engineering
designs when they have high level of skills in production.
When Toyota faced lapses in product quality it is announced to recall millions of cars around the
world from the most popular models which were affected on the market share and reduced the
share prices not only for that but also affected on the brand image for costumer and shook
costumer’s confidence. (Slide share, 2013, Toyota Analysis)
When Toyota decided to enter the European market they had lack of experience among the
European competitors especially with suppliers and new young segment of costumers. Also it is
such a strange investment which made it look as an interrupter from the local’s point of view,
given it has overcome this issue but it is still not counted as proud European manufacturer like its
rivals.
Resource Audit
Most parts of Toyota cars production is outsourced, it makes standards for their production and
get it from various specialized manufacturers such as, tires, glasses, water pumps, so it helps take
a lot lesser time in production and makes better product quality, it has physical plants and assets
around the world.
They use resources to generate competences which is applied in their strategies and competitive
advantage also integrate technological resources and the capital in machines so it makes
competence in production to contribute in a sustainable competitive advantage.(study mode.com,
2013, Resources and Capabilities of Toyota)
Toyota has strong capabilities in human resources, intellectual capital, learning and knowledge
management, they share and train their suppliers along with their staff to maintain their core
competence.
9
Value Chain Analysis
Figure 1 :Value Chain analysis
(mekogroup.com, value chain)
For primary activities:Inbound: The company almost obtain raw material from third party, they also handle small parts
not manufacture, and keep good relationship with their suppliers.
Operation: Toyota is properly manufactured and assembled, it is known for its reliability and
durability thanks to the efficient operations.
Outbound: They store and distribute their finished products to dealers to make them easily
reachable.
Marketing & sale: They focus importantly on marketing and the promotions variations to meet
what the targeted customers need.
Service: Toyota appreciates and gives value to their customers, so after-sale, maintenance and
other services are included. (scribd.com,2009,Value Chain Analysis)
For support activity:Infrastructure: Toyota handles and controls its different departments by Management Information
System and other systems.
Human Resource: Toyota values their employees as Human Capital, they aim to maintain their
employees by training and developments.
Procurement: It aims to reduce the prices for purchasing with the most possible quality and they
use e-Purchasing.
10
Technology: Toyota implements production technology and innovate to reduce cost by using
internet activities and other technological developments. (scribd.com,2009,Value Chain
Analysis)
Core Competence
Toyota is rich in core competence which is high professional skills in management, high
technology and knowledge with good relationship with competitive. It has high capabilities that
give it high performance and production which made it distinct among competitors.
The company is looking for unique product which is recognized by its ability to manufacture
cars with great quality and best prices to meet costumer high expectations.
With continues improvements in the Japanese word KAIZEN Toyota distinct in continuously
advancing in production, it has just in time production which give it high efficiency in
production. (www.Toyota.eu, Sustainability Report 2012).
Strategic Capability
Toyota is a company with strong management capabilities that makes it to increase its value with
time, with high ability to use competitive strategies successfully by focusing on assets and
resources and market position.
It has the ability to use their strategy for the future globally; it has successful management
capability in Europe especially when they employ their capabilities and resources to meet
standards for Europe in a challenging market. (Toyota.eu, Sustainability Report 2012).
Competitive Advantage
The competition in the automobile industry is strong in Europe, TME faces big players to
compete with, it is struggling to increase its market share.
It creates a unique brand image in the mind of the targeted costumers which is an advantage over
the competitors. The company always keeps an eye out on their competitors with continuously
improving quality and low cost.
TME has accomplished a great achievement of the mini cars targeted segmentation, especially
with less fuel consumption and low price in the Aygo and Prius.( Slide Share.com, 2013, Report
on Corporate Level Strategies)
It has created a competitive edge over costumers to keep them satisfied by developing and
implementing their core competence and capability.
11
Task 3
Introduction
As mentioned previously on the environmental analysis for the internal and external factors it
appears that Toyota is a one company that cannot be underestimated and is considered a huge
competitor for automobile companies in the industry.
It focuses mainly on being known to be low in price with good quality among its competitors,
environment friendly is considered one of the major strategies for Toyota, especially in Europe,
globally expanding all over the world, adapting with many cultures and take societies needs,
without neglecting the cutting edge of technology.
st
1 issue is Low price
Toyota mainly adopts low cost strategy as one of its competitive advantages they are focusing on
reducing cost for all supply chain management starting from suppliers and resources of raw
materials during operation to sales, logistics and capabilities in overall, when all other
competitors focusing on reducing the cost Toyota achieved leadership in low cost production.
(www.Toyota.eu, Sustainability Report 2012).
Toyota should adopt competitive strategy in Europe by implementing low cost leadership
strategy.
Low cost leadership occurs by Toyota having their own channel of raw material suppliers to
avoid fluctuation increase from the suppliers, redesigning of component process to save
sustainable cost.
They needed to be careful to make a decision to having assets and insuring those assets are fully
used, low cost of product design, engineering and a skilled workforce.
Low cost is a main interest of the targeted customers because of the economy uncertainty,
increasing fuel prices and high unemployment rate in Europe, given this it makes it an
appropriate strategy.
nd
2
issue is Environment
Another corporate strategy for Toyota is to save the environment and keep the environment green
by reducing emissions CO2, less fuel efficiency and innovate hybrid car with electric motors.
(www.Toyota.eu, Sustainability Report 2012).
For this issue, the best strategy the differentiation, increase market share with changing the
costumer’s perception for Toyota products as a competitive car by added value downstream
choosing clever advertising and promotion to view to the costumer the meeting of their needs for
environment responsibility.
12
rd
3 issue is Social
A clever competitive advantage of Toyota is involving with the countries culture, in Europe they
focus on the society awareness of the economical practices to save the economy. They gain more
loyalty of the costumers by dealing with NGOs and involve corporate social responsibility
through social activities. (www.Toyota.eu).
Appropriate strategy for this issue is by adopting social responsibility, one of the good business
ethical practices and showing their care of improving people lives, supporting awareness
campaigns for the society, support charities and education.
This strategy will keep the stakeholders satisfied and give out a positive vision to the world about
Toyota.
13
Task 4
Undoubtedly when the organizations implement their strategies facing problems and barriers,
strong management is the key behind overcoming these barriers, it plans and implements
emergent strategies to flexibly change their approach of achieving their vision.
For Toyota strategies as mentioned previously for implementing low cost leadership strategy
many problems and barriers Toyota might face, some of it is like the ones developing and
improving the quality of technology, and keep up with the modern technology, especially when
they add new electronic systems and sensors.
When the company plans to apply the low cost strategy, that means they will decrease all cost for
all value chain in primary and supportive activities, these will affect directly on the quality of
technology because they will not be encouraged to spend more money for research and
development, and support innovation centers which slows down the technology growth in
comparison to the competitors, the new technology production may appear defected that would
force the company to recall the defected cars which will lead to losing customers trust and
reputation, and society loyalty.
Other problems that may face the low cost leadership strategy is price increase of raw materials
and suppliers over-controlling the prices, forcing the company to raise their product cost
affecting its known reputation of value of money.
Also currency exchange rates in the scale of economy between company, suppliers and
distributers may also make Europe increase the taxes rates for the foreigner markets, and making
inappropriate advertising and promotions to the society.
The company should keep its prices low for this strategy and adopt operational strategies to
maintain capability and resources for appropriate prices. The implementation strategy should be
flexible and emergent perspective in action plans which deals with all emergent cases that
becomes a barrier of implementing the strategy.
Suggestion for the low cost strategy, to keep technology growing with low expenses is to
encourage younger people, invest and support innovation in schools and social groups and award
the young learners by making technological competitions whom wages come lesser than the
experienced ones, generating new ideas from the young minds.
14
For suppliers it should seek out joint venture and strategic alliance opportunities and invest with
suppliers and share the stocks to contribute with the suppliers decision.
The strategies should be focused on the operational performance objectives quality, speed,
dependability, flexibility and cost to create competitive products with achieving organization
goals without neglecting any safety and technology.
15
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