Toyota Motors Business - Case Study Example

Toyota Motors Company Overview Toyota Motors a Japan based company has been founded by Kiichiro Toyoda in 1937. Today this company is having world wide presence and its vehicles are running on roads all over the world. Toyota has always focused on its quality of production. Research and development department of Toyota focuses on major three areas which include environment friendliness, safety features and energy consumption. It has a few reputed names under its product line which include Toyota Camry, Toyota Lexus, Toyota Corolla, Toyota Venza, Toyota Avalon and many other reliable cars. Toyota is still able to sustain with its reliable brand image because of its innovations and customer centric approach. In the year 2008 the total sales of Toyota cars in European markets were decreased by 9 percent to 1,074,281 while sales figure of Toyota Lexus models increased by 16 percent to 45,240. Toyota Europe aims to enhance its market share by 0.7 percentage points to 6.0 percent in 2009. (McVeigh, Paul) PEST Analysis Introduction Whenever a company plans to start a new venture it is very important to evaluate internal as well as external factors which can influence the business. External factors which are basically macro-economic factors like income level, credit facilities, prices etc. play a very important role, because these are something on which companies don’t have any control. These macro-economic factors pertain to systematic risk which is unavoidable. To evaluate the external factors company uses PEST analysis which mainly includes 4 major factors like Political-Legal, Economical, Socio-cultural and Technological. PEST analysis helps us to make a strong and efficient planning. Same business strategy model can be applied for Toyota Motors. 1. Political-Legal Environment: These kinds of environment pertains to the law of the land, different government agencies, different kinds of non government organizations (NGO) and influence group like trade unions can affect the environmental scenario for the business. Toyota motor which is having world wide presence caters and governs by the rules and regulations of the lot many countries. Currently Major world economies are facing recessionary pressure which means its kind of sluggish situation in the market place. Take for instance in USA where major homegrown automakers like Ford Motors, GM and others are at the verge of collapse, so in that case the government rules and regulation would be much more protective to these companies. In that scenario a foreign soil car maker can have tough time in that country. Same gloomy scenario of recession will force the law makers to protect those companies in order to save them can look for foreign buyers, and that can acts as a boon for Toyota Motors to buy some assets of those companies in throw away prices. As far as its home soil is concern it doesn’t faces many political or legal challenges there, but in these tough recessionary period as a large number of people are loosing their jobs, Japanese government would try to press hard to not to allow Toyota to cut jobs for cost saving. Although few big Asian economies are not much affected by recession but they themselves are facing slowdown periods and in order to protect their homegrown automakers, government can impose heavy taxes on imports of Toyota vehicles. 2. Economical To sell any product organization requires purchasing power with its prospective customers. This purchasing power rely on the availability of credit, saving rate, price sensitivity etc. So as to plan for various international markets company needs to evaluate all these factors. If we talk about the U.S. car market, there is a decline in the demand of automobiles because the current recessionary period. U.S. has always considered as a largest consumer of automobiles but today consumers does not have incentives to buy cars. To boost up the economy government has reduced the interest rates but still customers are reluctant towards car loans. Thus U.S. car market is seeing a steep down turn. As an MNC Toyota needs to look at the economic factors like inflation rate, interest rate, labor cost, economic growth rate, unemployment rate etc. Taking Indian context, current scenario shows that Indian consumers are having ample sources to fund their investment in cars. Factors like raising demands for car loans, easy availability of credit and high saving rates etc. create a huge market for Toyota in countries like India. 3. Socio - Cultural Under this head company evaluate factors which can affect the consumer buying prospects (Preferences and Tastes) and demand for the product which is based on various demographic, geographic, lifestyle and cultural variables. Each customer is different from another; some customers can have high preferences for safety features in a car while other gives priority to low energy consumptions and low emission. Demographic, psychographic, geographic and cultural variables are the reason for different preferences. Socio cultural factors determines the consumption patterns, for example – Currently a large part of the total Indian population consist of young people but this is not the same case with U.S. so Indian consumer have different demand than U.S. consumers. For Toyota, evaluation of Income status, literacy status, population growth rate etc. of consumers is necessary to decide company’s target market. As mentioned before that Toyota focuses on effects of its cars on environment, so does its consumers are ready to pay high prices for environment friendly cars, is it have a larger potential customer base for its eco-friendly cars? These questions need to be answer before planning. 4. Technological Automobile is such an industry where companies need to keep them updated with latest technological improvements. Toyota is known for its innovation. Each and every year Toyota asks its employee for suggestion in terms of innovating new products and process changes and they implement the best suited idea which is for the company and people interest. In terms of technology usage Toyota invented Just in Time (JIT) technology. JIT means customer, supplier and productions processes are integrated which enable them to act efficiently whenever demand occurs. It allows Toyota to do away with most of the inventory requirements, which cuts the cost in big way. Company is also investing fuel efficient and hybrid technologies to cut through the clutter. In Asian market companies like TATA and Suzuki launched new technologies in the small car segment which is more fuel efficient in nature and would be having low running and maintenance cost as there is external demand for the same. Figure 1 - PEST Analysis Tree for TOYOTA Works Cited McVeigh, Paul. Toyota pledges to boost its European market share in 2009. 2 February 2009. . Read More