Effect of the Technological Change on the Business Environment of Toyota in the EU - Case Study Example

Evaluate the Effect of the Technological Change on the Business Environment of “TOYOTA IN THE EU” Table of Contents 0.Introduction 3 2.0.Changesin Technological Environment of EU 4 3.0.The Business Environment of Toyota in Europe 7 4.0 Impact of Technological Change on the Operations of Toyota in Europe 9 5. 0 Conclusion and Recommendations 14 References 17 19 1.0. Introduction Along with other factors of economic environment of a country, such as political, legal, natural and social environments, technological environment also possesses a significant role. With an economic perspective, basic components of technological environment of an economy are its research & development trends, innovations, productions and others. Notably, technological environment is interlinked with other attributes of an economic environment, such as regulatory policies, GDP growth rate and demand of national as well as international market. These components have been recognised to be changing in the European economic environment. For instance, technological environment of the European Union (EU) has been noticed to favour nanotechnology and communication technology rather than other technological innovations. Consequently, this shall have a great impact on the performance of businesses which are entirely based on the technological environment, e.g. Toyota. With this concern, objectives of the paper shall be to assess various changes occurring in technological environment of the EU economy and its impact on the performance and/or organisational operations of Toyota in EU. The discussion of the paper will be thereby focussed on identifying opportunities and challenges which are likely to be witnessed by the company due to the technological change in its business environment. Subsequently, the paper shall also intend to recommend few significant measures for the company. 2.0. Changes in Technological Environment of EU In modern day perspective, economic environment and its components possess a crucial role in influencing the growth of an economy. Few major components of economical environment of an economy are its political, economical, social and technological environment. Most economies, along with the EU have become largely depended on its technological growth which defines environmental aspect as one of the most crucial phenomenon of 21st century. Evidences reveal that technological environment of the EU is changing rapidly with a strong influence on social and economical environment at large. For instance, the member countries which are part of the European Union, such as Denmark, Germany and Poland are recognised to be largely depended on coal industry. Consequently, these economies release higher amount of greenhouse gases and generate larger amount of heat than other economies in the union. On the contrary, technological trends of the union are recognised to be focussed on NBIC technology, i.e. biotechnology, nanotechnology, information and communication technology and cognitive science. This forced the countries to set up end-of-pipe technologies, which in turn shall reduce hazardous impact of technological development on natural environment of the union (Eurostat, 2010). Another major trend of the technological environment of the European Union was the enforcement of tax on NOx in Sweden and similar taxation policies on technological practices which are harmful for environment in other countries. Remarkably, almost 7% of technology based firms of Sweden initiated to imply the available ‘abatement technologies’ in 1992 and one year later, number of firms using these technologies increased to 62%. Thus, the taxation policies also had a great influence on business sector of the economy (OECD, 2010). With a growing concern of eco-friendly technology, regulatory framework of the union is also promoting eco-technology and innovations. Due to this fact, most technology based companies are tending to incorporate renewable technologies in their organisational operations. Governing bodies of the union also enforced various other policies with the target to encourage usage of renewable technologies and increase the imports and exports by €45 billion and €5-7 billion respectively by 2020. To be precise, the EU deployed policy instruments in terms of ‘command-and-control/direct regulation’ including technology standards of the region integrated with enforcement and ‘Environmental Technology Action Plan’ (Rayment & Et. Al., 2009). Figure 1: CO2 Emissions in Europe Source: (Libralato Engines, 2010) However, in previous years, it can be witnessed that member economies of the European Union implemented technologies which were extremely harmful to environment of the region. However, in present era, the focus is on eco-technology or clean technology with a significant consideration to the aspect of global warming through air pollution and gas emissions. In order to promote the use of clean technology and other eco-technologies, regulatory framework of the EU was re-structured enforcing tax-increase on harmful technologies and undertaking relevant policies. Notably, these reforms have created an immense influence on business and social sector of the EU economies. For instance, tax-increase on the usage of NOx has forced many companies to restructure their organisational operations, especially those which are based on technological innovations largely. It also forced several companies to use clean technologies in their operations, while the market of the EU is considered to be discouraging in the case of clean-technologies. Certainly, it also has a great impact on operations of Toyota in the EU market. To be mentioned, the impact of the changes occurring in the technological environment of the EU shall depend on the company’s operations and its technological vision. 3.0. The Business Environment of Toyota in Europe Toyota is a globally renowned automobile company that manufactures, assembles and markets varieties of cars in numerous parts of the world. The company instigated its marketing operations in Europe from 1963. It is fully owned by Toyota Motor Corporation. Presently, the company captures a wide market area in Europe covering 17 countries in the European Union region. There are 9 manufacturing plants scattered throughout these countries. It also has 9 vehicle logistic centres in various parts of the region along with 14 major distribution centres. Marketing and selling network of Toyota in the EU comprise of 30 European Marketing and Sales Companies, among which few are affiliated by the company while others are independent companies (Toyota, 2010). Due to its wide coverage in the European market, it is quite likely that the operations of the company will get influenced by the fluctuations in the economic environment of Europe. Not only the social preferences but also the taxes, demography and the political factors will also influence the business environment of the company. But apart from all these factors the company’s operations are likely to be strongly influenced by the technological changes as it entirely deals with the technological innovations. This can be identified in its marketing techniques that are mostly focussed on the communication technology. It can also be well-recognised in its production system in Europe. To be mentioned, while manufacturing a car and/or designing the various parts of a car, the company’s engineers primarily focus on utilising an appropriate technology which will require minimum energy and raw materials. Simultaneously, the car engine will be able to reduce the waste of raw materials and intend to deliver supreme quality as per the demand of the customers. For instance, the total energy usage of the cars manufactured by Toyota, especially for the European market was recorded to reduce their energy usage by almost 44% with comparison to the average energy used by every car in 2001. The freshly executed production system has also reduced the water usage by 37% from 2001. The packaging systems have also been replaced by the renewable packaging systems in order to gain a sustainable growth in the market (Toyota, n.d.). Contextually, it can be stated that the production system of Toyota has emerged to be highly focussed on the sustainability issues which can in turn be identified as the change in the technological environment trends of Europe. Hence, it is quite apparent that being an automotive manufacturer and marketer the business environment of Toyota is highly influenced by the technological environment which is factually more than any other factors in the economic environment of Europe. However, the impact of the technological environment of Europe on the business environment of Toyota will be discussed in the further study of the paper. 4.0 Impact of Technological Change on the Operations of Toyota in Europe One of the significant aims of the company in 2009 was to reduce CO2 emission and simultaneously increase the fuel efficiency in the cars designed by the company. Focussing on the aim, Toyota provided a remarkable importance on the aspect of technology used in its operations. To be mentioned, the changes in the technological environment of the EU can also be observed to influence technological operations of the company (Toyota, 2010). The approach which has been presently applied by the company in its operations related to technology is to develop a wide ranging clean technologies to be used in an automotive industry. The technology innovations of the company are also focussed in reducing the consumption of petrol and diesel, which are ‘mainstream automotive fuels’ and promote the usage of ‘clean and green technologies’. Notably, the company was the first to introduce a full-hybrid car in European market (Toyota Motor Europe, 2010). Figure 2: Toyota’s Approach to Technology Source: (Toyota, 2009) Top of Form The company also considered few initiatives to reduce the effect of technologies on environment of the region. For instance, the company aimed at using technologies which would not directly hamper the usage of conventional technologies in the automobile manufacturing, but shall reduce its impact on climatic conditions. Notably, the company’s strategies have also been incorporated with due consideration to the aspect of customer satisfaction. In other words, the company provides great significance to preferences, comfort and safety of its customers while undertaking strategies to reform its technological vision (Toyota Motor Europe, 2010). According to the marketing theory, the role of customer satisfaction in assisting the company to achieve a sustainable and competitive position in its targeted market is one of the most crucial components. Subsequently, the significance provided by the company to the aspect of customer satisfaction will enhance its market reputation and lower the impact of operational challenges which can be observed due to the changes taking place in the technological environment. However, it is quite evident that the changes in the technological environment of the EU strongly influenced the restructuring of technological vision and approach of Toyota. For instance, the policy trend in the EU favoured the convention of clean technology, due to which the company also deregulated its operations and organisational approach towards the clean technology. Conversely, the change in environment not only influenced the organisational operations but also its performance in the European markets. It is due to the fact that the change in the technological environment also influenced business sector of the region. Another crucial element of marketing a product according to the theories is the market demand which signifies its successiveness. But in the realistic terms the market for clean technology in the EU was remarked to be unsuitable which created a strong influence on the performance of the company. In other words, market demand was not termed to be sufficiently promising in marketing automotives with new technologies when the technology operations of the company was tending to be more concerned to its application. This was due to the fact that during the period of 2007-2009, the European market witnessed fragile economic conditions along with rigid credit access. Moreover, realising the climatic conditions and the technological hazards taking place in the region, regulatory framework was set on the mode of re-evaluation. This in turn caused a high level of fluctuation in automobile sector of the union. As a result, consumers mostly favoured used cars which hampered sales of several automotive companies in the EU (BMI, 2010). Consequently, the sales of Toyota also witnessed a downfall during the period. There were multifarious reasons for this decline, such as global financial crisis. However, policy regimes of the union were also quite significant to affect the business sector and in turn the operations of the company. To be precise, due to the policies introduced by the regulatory bodies in Europe in order to enhance the use of clean technologies, the company initiated to introduce new technologies in the market. Despite its efforts the company witnessed a decline in its sales during 2009 which further continued to 2010. Figure 3: Last Three Years Revenue of Toyota in Global Market Source: (Toyota Annual Report, 2010) 5. 0 Conclusion and Recommendations The foremost aim of the technological change in the European Union is to reduce the carbon and the NOx emissions in the region. In this regards, evidences reveal that a major proportion of emissions take place in the European region due to the automotive industry. Therefore, policies are also reformed in a manner to regulate the operations of the automotive industry in terms of manufacturing cars. In other words, presently there exist strict environmental restrictions to minimise the CO2 emissions by automotive companies, especially those which are associated with manufacturing. Simultaneously, the policies are aimed at enhancing the application of clean technologies. The reforms were imposed by regulatory bodies in 2007, which created an immense effect on automobile sector of the region. Basic reasons for this reformation can be identified as degradation in climatic conditions and decrease in the amount of ‘mainstream automotive fuels’ (Ruete, 2009). The reformation also affected the operations of Toyota in Europe. For instance, technological vision of the company shifted from mainstream automotive technology to the implication of clean technologies. This not only assisted the company to strengthen its position in the region in terms of sustainability and innovations, but also raised various opportunities in terms of competency. However, operations of Toyota also seem to be negatively affected by reformation of the technology policy and environmental restrictions. Worth mentioning, the sales of the company were recorded to decline continuously for a couple of years due to fluctuations of internal environment (due to reformation) and external environment (due to global financial crisis) as well. However, in present scenario, the company seems to be on the mode of growth, although economic conditions of the region continue to be weak. With this concern, the company should be more focussed upon the promotion of the clean technology in the European market. It should also re-evaluate its pricing structure in an economic region with due consideration to the consequence of recent global crisis. Conclusively, it could be better if the company initiates to focus on emerging economies of the world more than the European markets for a short-term period until environmental conditions become stable in terms of economy and technology in the EU. References BMI, 2010. Overview. Central and Eastern Europe Automotive Market. [Online] Available at: http://trade.gov/static/CEE%20Automotive%20Market%20Final2.pdf [Accessed March 11, 2011]. Eurostat, 2010. Environmental Statistics and Accounts in Europe. European Union. [Online] Available at: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-32-10-283/EN/KS-32-10-283-EN.PDF [Accessed March 11, 2011]. Libralato Engines, 2010. Oil Use. Research: Transport CO2 Emissions. [Online] Available at: http://www.libralato.co.uk/te_oil.html [Accessed March 11, 2011]. OECD, 2010. Taxation, Innovation and the Environment. OECD Green Growth Strategy. 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