PESTLE Analysis of Toyota Company - Case Study Example

This report is the detailed PESTLE Analysis of Toyota, which has become the flagship company in the car industry across the world.

Political Factors

Hostile governments in Venezuela and Nigeria have increased US dependence on OPEC and Russian oil.

Political instability in the Middle East including the Iraq war, Iranian tension, and Israel / Palestine Hostility (Pickton, 2001)

The instability serves to make fuel efficiency a more significant decision factor for vehicle consumers, increasing the desirability of the plug-in hybrid. Certain consumers may see purchasing a plug-in hybrid as a move that reduces dependence on foreign oil and one that serves to bolster US independence while reducing the bargaining power in adversarial governments.

Economic Factors

The entry-level and middle-level market segments are very sensitive to price and vehicle durability. Toyota has been able to translate its cost advantage into vehicles with higher, more attractive content and longer life than GM.  He further adds that Toyota's Camry and Corolla, and derivatives of those cars have been able to dominate their market spaces they set the standard others must follow and establish the price thresholds. Professor Peter Morici, School of Business at the University of Maryland and former Chief Economist at the US International Trade Commission remarked that Toyota enjoys much lower labor costs in the US and benefits from an undervalued yen for cars made in Japan. In the US, this comes to about $2500 per vehicle (Rossiter, 1998). In 2008 and 2009, a series of shocking economic events hit the world and Toyota. Toyota had been sprinting toward Vision 2010 of 15% market share, adding new products, building plants, deploying trainers from Japan, and focusing on how to feed growth. To add insult to injury, the Japanese yen strengthened by 15% from July to December of 2008, and so every car shipped from Japan to the US cost 15% more. Ultimately, this led to the first loss in over 50 years of over $5 bn (Toyota Motor Corporation, 1997)

Social Factors

Also, Toyota has to overcome a string of problems. They include: ensuring quality and managing a sprawling network of manufacturing and sales. In spite of Toyota's plans to set up its plants in the US, where it has to deal with labor-related issues, which its rivals are facing (Yadin, 1994). The American patriotic feeling may put the Japanese company into trouble. The US native slogan is ‘Wake Up America and Buy American’. Challenges the company sales in the US market. Toyota, however, has taken great pains to identify itself as an American company by building plants in the south. Toyota had already earned the trust of its existing American customers (Rosen, 2000).

Technological Factors

Toyota is producing dominant cars from its highly efficient production system led by an efficient assembly line. It has built a reputation for technological leadership as well, most notably with the hybrid and fuel-efficient cars, such as the Corolla and Yaris, and gas-electric hybrid Prius, which became big hits because of surging gas prices (The Telegraph, n. d.).

Armed with cost and quality, Toyota is proud to say that its `Toyota Production System (TPS)' is the key to its success. Prof. Jim Matheson of Stanford University says "The process needs low-cost and quality, and Toyota is a role model example of how to use cost and quality to get on the playing field" (Fitzgerald, 2000). Its success has been helped by developing hybrid technology, fuel-efficient models, cutting costs, boosting the global brand image, and having high morale and unity.  Toyota's management philosophy has been reflected in the terms `lean manufacturing' and `just-in-time production, which were the secrets behind its success

Legal Factors

• AB32, California ZEV
• Improved legislation regulating business
• altering government agency enforcement
• Development of public interest groups
• Local groupings

Governmental initiatives to encourage low emission / high fuel economy will serve as attractors for Plug-in Hybrid customers.

Environmental Factors

Compared to the Big Three, Toyota is in its comfort zone. Strategically, it was in a good position with its small cars when the first oil crisis took place in the 1970s. Firstly, now the US is committed to devoting huge resources to renewable, clean energy. Certainly, any innovations flowing from US research will flow first to US automakers (Smith, n. d.). Moreover, the conceptualization, flair for innovative design, and manufacturing of top-quality cars within the easy reach of global consumers' pockets are such a coordinated, complex undertaking. Such is the dexterity that manufacturers require, and only those with years of sustained effort can emerge as masters. The company has been following an environmental policy that ensures sustainable development.