Environmental Analysis - Assignment Example

?A PESTEL study of the broader environment Toyota is well known for its cutting-edge technology in the world and such is a living legacy that it could pass on to its corporate existence from generation to another. Just like any other leading car manufacturers in the world, Toyota has remarkably created its competitive edge because of coming up with products which are highly differentiated. Not only that, it also tries to maintain its focus on certain segments that other car manufacturing companies can hardly beat until this moment. It also tries to achieve overall cost leadership in order to absolutely cater customers who are sensitive to price and cutting-edge technology. It seems all of these are basic and generic strategies used by Toyota which is found from the theory of competitive advantage by Porter (1980). This only proves that Porter’s theory of competitive advantage still applies until today. Due to this competitive move that Toyota is trying to achieve, the company was able to cut cost while ensuring customers about its cutting-edge technology. With this move, Toyota will be able to cut cost for the price of its offerings but it is still to ensure customers with its standard quality products. Toyota has become the leading car manufacturer and producer in the world because of its quality line of offerings and cutting-edge technology. This remarkably was able to gain social acceptance. This is due to the fact that the society is eager to accept something new and in line with the age of technological revolution. However, the real threat behind this smooth social acceptance for the products manufactured by Toyota is actually on the fact that they are assets of the company. Toyota’s products are certainly its assets. However, recent world-wide recalls of products produced by Toyota have triggered social concerns. This particularly includes quality and safety issues. It was noted that in the year 2009, Toyota paid $10 million to four families in the UK who were killed from a runaway Lexus car due to faulty design (BBC News, 2010). Within 12 months up to November 2010, there were reported 229 products recalled in the UK due to health and safety issue, production and design flaw and other related quality issues which part of them were car products (BBC News, 2011). This only shows that the market in the UK is very determined to stand on the quality of offerings which might be difficult for Toyota to get through after it had suffered from issues on quality related matters. Considering that Toyota’s products are its assets in obtaining its target revenue, the incidence of quality problem has substantially triggered social concerns among buyers. This is due to the fact that in the UK alone, quality is tantamount to safety and value for the money invested on certain products. This can be clearly observed how the government had responded aggressively to product recalls as initiated by Toyota Motors. The problems affecting Toyota are not only focused on social issues but they also include highly political concerns. With the increasing concern on cutting-edge technology, government has brought forward the necessity to conduct thorough investigations on product quality and implementation of efficient technology. It is therefore clear in here that there is a strong link between political and technological concerns. On the part of Toyota Motors, there is a strong downside of technological exploration. However, on the part of the law, Toyota Corporation still has to face any noted violations as believed by the law to be beyond reasonably doubted. For the law, this is just to ensure social safety and corporate responsibility. Thus, Toyota was fined particularly in the US for about $16.4 million, the highest so far in history due to legacy issue on car recalls in line with quality issues (BBC News, 2010). Another important aspect that needs to be understood is in line with environmental concerns. The emission of green house gases leads to global concern about the environment. In other countries for instance, there is a strong urge to go for sustainable fuel or efficient vehicles that only emit less hazardous gases to the ozone layer. This is a significant environmental issue that has strong implications particularly in the car industry. On the other hand, as shown in Appendix, Illustration 1, the global sales for passenger cars and light commercial vehicles for Toyota and other leading car producers in the world were declining starting from 2007 until 2009. This was the period of global economic recession and it only shows that car manufacturing industry was heavily affected by such economic event. As it can be clearly observed, the United States and its economy are strongly tied up to bigger corporations such as Toyota. This only shows that the economic environment has direct impact on the car industry particularly for Toyota. From 2007 to 2008, Toyota’s global sales have momentarily decline. The Industry analysis In its very obvious form in the marketplace, competition is the basic driving force in the car industry. Because of this competition, each competing organisation in the car industry is willing to stimulate demand. Such stimulation of demand leads to product innovation and other competitive strategies (Kotler et al., 1999; Boone and Kurtz, 2006). For how many decades until now, the fierce competition is a strong driving force in the car industry and it cannot be substantially healthy without it. Because of this competition, there is a strong force that gives customers the chance to enjoy their needs as they have strong power to demand in the market their real needs. In fact, this is evident to how actually every car manufacturer has stimulated demand for their offerings particularly on the part of Toyota Corporation. Its marketing strategy has basically given it a chance to stay a cut above the other starting from the first glance of the twentieth century. It is therefore clear that marketing strategy has an important role to play in a market where there are different players but are providing almost the same line of products. On the part of the customers, this is substantially good. However, it remains a great challenge among the key players in the car industry particularly for Toyota Corporation due to a consistent and challenging marketing effort. The sophistication of marketing information and information technology have combined together in order to create a unified approach that increases the competition in the car industry. This has created something about stimulation of demand for the line of products. This leads further to the sophistication of needs among customers. Thus, customer’s needs have become sophisticated. They know exactly what they want and today’s marketing activity has something to do with customer centric approach. Gone are those days of production-centred in dealing customers’ needs. Today, a manufacturing company has to understand the concept of customer needs. However, some theories are still in line with understanding customer’s buying behaviour in the modern way of creating needs for offerings. In particular, this can be substantially implemented through understanding social, cultural, personal and psychological characteristics of the buyers (Kotler et al., 1999). The whole thing as it can be clearly observed is about innovating possibilities. In order to stand competitive among the other players, it is important to go for innovating possibilities. It is always important to go back to the basic before going beyond its line. Innovation is such a strong and powerful force that works its way so strong in the car industry. In fact, Toyota was able to come up with environmental technology as can be observed from one of its offerings in its official and global corporate website. In the first place, there must be something important target market that Toyota Corporation is trying to hit by this line of its marketing strategy. In the car industry, it is obvious that there are four essentials key players that unknowingly have tried to go for competition among each other within the bound of the industry. Presented in Model 1 is Porter’s model of industry boundaries. This model can be substantially used how the competition is maintained in the industry. In the car industry it is remarkably clear that it is not Toyota alone which has significant market share. There are other firms who can substantially provide for the needs of the customers. It is in this reason that buyers have the power to demand based on their needs. This opens up great opportunities for potential entrants and for suppliers to further name their price. As a result, competition is becoming intense. This gives every key player an equal chance to stay a cut above the competition. However, this shows the complexity of managing a business in the car industry. This also shows that there is a great demand in the car industry to strengthen marketing activity in order to come up with detailed competitive strategy. In fact, car manufacturers are creating more new innovative design but they keep it secret until the premiere event of those products as an indication of a strong and intense marketing effort. These are just some parts of competitive strategies that can be clearly observed. Porter believes that there must be generic strategies that every firm must learn to use as the basic in the competition. Shown in Model 2 is Porter’s model of three generic strategies. These strategies are obviously the basic strategies used by Toyota and even the other key players in the industry. This only shows that Porter’s model of three generic strategies is still not hopelessly outmoded. As of the moment, Toyota is still looking for remarkable market segments by offering different line of products that are highly differentiated. Furthermore, there was also an attempt to go for overall cost leadership. This was initiated by reducing production cost but such was able to lead to a tragic end. The main proof to justify Toyota’s means was the on-going concerns on its product recalls regarding quality flaws and other related concerns. This could also show another important implication that product quality cannot just be compromised with cutting production cost. This is true in the case of Toyota because such car manufacturer has been confident about its product quality for how many years. Thus, Toyota must consistently invest in its product quality, but it seems the company was able to free a little higher its focus for a while. Model 1. Industry Boundaries (Porter, 1980). Model 2. Three Generic Strategies (Porter, 1980). Potential directions available to the company for future growth Sustainability is such a broad concept because it requires total understanding of the entire business environment which particularly would include political, economic, social, technological, legal and environmental aspects. Sustainability can be broadly defined and one of the most common ideas about it is its being a process in preparing for what lies ahead in the future (Summer, 2007). This can be specifically cited as a way of conserving the environment especially now that the global warming issue is under a heated debate and now some countries are trying to look for alternative energy sources prior to addressing the issue of environmental sustainability. Northern Island for instance is targeting at most 40% of alternative energy sources by 2020 (BBC News: Northern Ireland, 2010). This is in line with minimising the total dependence of its economy on coal, gas and oil. In fact, this total dependence on fossil fuel has been measured to result to high level of green house gas emission as summarised in Table 1. In line with this issue, the idea of car that saves oil and gas comes into the whole picture in the modern car industry. This savings of oil and gas does not only consider economic advantage but at the bottom line it also promotes environmental sustainability. In South Yorkshire for instance, a vehicle that promotes sustainable motoring has been currently enhanced to be efficient with alternative fuels that are aimed to be environment friendly (BBC News: South Yorkshire, 2010). The global warming is an important and significant issue considering that many countries have tried to regulate or control green house gas emission. This gives an opportunity to develop products that are in line with environmental technology. This certainly gives Toyota a new opportunity for the creation of new line of products which are strongly linked to the recent environmental aspect of sustainability issue. As it can be clearly observed, there is a strong need to create products that will substantially address environmental issues. This is a good opportunity in the car industry knowing the fact that there is a great chance to increase understanding of buyers and to predict their buying behaviour without complexity. However, considering that the car industry is a specific marketplace where there is intense competition, customers have wide array of choices to choose from. They can substantially demand for their needs. The whole thing is most likely to turn out into a matter of building strong relationship between a car manufacturer and the buyers. Furthermore, this definitely would result to creating the best design with substantial consideration of the environmental issue. However, it cannot just be overlooked that aside from environmental technology consideration and fuel efficiency, buyers are still looking forward to other important factors in a vehicle. There are different criteria and thousands of combination of features for a vehicle design that can be available from the needs, demands and wants of the customers. It is now just a matter of integrating them into a one unique product that will be highly differentiated to stand out among the other. However, considering Toyota’s quality issue especially just last year, it might not be easy on its part to stand again and get its chance back to gain its impeccable standard. Things cannot just flow smoothly as possible considering that buyers have been given the chance to evaluate their choices. They have known Toyota for so long and even the other products as well. Even if the environmental technology is a great opportunity for Toyota Corporation, there is still no assurance on its part to influence significant number of people for as far as stimulating their buying behaviour is concerned. Buyers have become sophisticated when it comes to their choices and they believe they need to be given the best. This is evident on how those concerns about Toyota’s defective product recalls had reacted on the issue. For how many years Toyota has been relying on its products with utmost confidence on their quality. However, only a small detail of quality issue had triggered up hasty conclusion for its fate. This only shows that Toyota’s assets must be converted back to its productive state as its living legacy. The introduction of environmental technology is a matter of gaining back of Toyota’s opportunity and to build up people’s trust and influence their buying behaviour again to its new innovative line of products. This is not an easy task to do, but this is a great opportunity to start over a new leaf and substantially learn from the past mistakes. A concluding SWOT analysis (750) Strengths Toyota’s brand is without question is its powerful strength. This is due to the fact that the name Toyota is tantamount to quality, cutting-edge technology and customer choice. Toyota was able to place too much emphasis on the issue of quality and as a result, it gained remarkable products that are highly differentiated. Because of this, Toyota has been perceived unique of its kind in the industry. Toyota is also known for its product innovation based on understanding customer needs at different segment. This resulted to production of different products suited to different segment. This is a specific strategy that has brought Toyota so much strength that it was hard for its opponent to go against its existence in the car industry. The bottom line of this is Toyota’s ability to come up with a detailed focus on how its products should be positioned in the market. This means that Toyota was able to substantially apply the generic strategy of Porter which in particular is about the power of focus. Weaknesses One of the greatest weaknesses that can be obvious about the case of Toyota is its not mindful about how it is important in its part to be consistent in its focus, especially in times of intense pressures that come from different aspects of business environment. Its willingness to go for cost leadership in the market was intentionally good. However, Toyota is known for its standard quality line of products. Lately due to economic and environmental pressures, its marketing proposition is to go for quality products at high affordability. This was clearly initiated by reducing production cost. However, such move is being justified as one of its greatest faults in its corporate history. Based on the upshot of its move, cutting of production cost cannot actually guarantee the same level of standard quality products which Toyota has been distributing before. Its best move therefore is to still remain focus to where it is known best. Opportunities Environment technology is another opportunity for Toyota. This means that the company should be able to come up with new line of products that are fuel efficient, eco friendly and with a total package of reliability. This can create significant appeal especially if the company will tie up with the governments that are pushing through environmental sustainability and other related issues. Thus, Toyota has remarkable significant role to play when it comes to political, social, environmental, technological and legal concerns. This also shows that Toyota is going to play a great corporate responsibility in the future due to the complexity of issues that is strongly linked to business environment. Threats Aside from economic aspect, minor bad image for Toyota’s brand is its remarkable threat. This means that such an issue can significantly lower the chance of Toyota’s sustainability due to existing competition. This can be used as a good opportunity for competitors against Toyota. The emerging or new entrants are other considerable threats. Considering that they can be competitive by specifically addressing the needs or requirements of buyers, the market share for Toyota may be affected at some point. This effect however may not be with great impact, but as the new entrants continue to play, they become master and eventually will lead to formulation of promising competitive strategies that may be different from Toyota’s. Suppliers are other threats because they can have strong market power and they could demand higher prices for their products due to existing fierce competition in the car industry. Appendix Illustration 1. Global sales (units in millions) for passenger cars and light commercial vehicles (Reed and Simon, 2010). Table 1. Specific average emissions (CO2, SO2, NO2) from fossil fuel-based electricity generation in the different EU-27 Member States in 2007 (European Wind Energy Association, 2009) References BBC News (2010) ‘Toyota pays $10m to fatal Lexus crash family.’ [Online] Available at:http://www.bbc.co.uk/news/business-12072394 (Accessed: 17 January 2011). BBC News (2011) ‘Rebound in product recalls in UK.’ [Online] Available at: http://www.bbc.co.uk/news/business-12150119 (Accessed: 17 January 2011). BBC News: Northern Ireland (2010) ‘NI Targets 40% alternative energy by 2020.’ [Online] Available at: http://www.bbc.co.uk/news/uk-northern-ireland-11416418 (Accessed: 17 January 2011). BBC News: South Yorkshire (2010) ‘’Poo-powered’ vans hit the street of Sheffield’. [Online] Available at: http://www.bbc.co.uk/news/uk-england-south-yorkshire-11205369 (Accessed: 17 January 2011). Boone, L. E., and Kurtz, D. L. (2006) Contemporary Marketing. 12th ed. USA: South-Western. European Wind Energy Association (2009) Wind energy – the facts: a guide to the technology, economics and future of wind power. UK: Earthscan. Kotler, P., Armstrong, G., Saunders, J., and Wong, V. (1999) Principles of Marketing. Milan: Prentice Hall. Porter, M. E. (1980) Competitive Strategy. USA: Free Press. Reed, J. and Simon, B. (2010) ‘Toyota’s long climb comes to an abrupt halt’. [Online] Available at: http://www.ft.com/cms/s/0/2f126b60-12be-11df-9f5f-00144feab49a.html#axzz15c9tXcq0 (Accessed: 17 January 2011). Summer, J. (2007) Sustainability and the Civil Commons: Rural Communities in he Age of Globalization. Toronto: University of Toronto. Read More