Toyota Global Business Environment - Essay Example

? Global Business Environment Inserts His/Her Inserts Grade Inserts (26, July, IntroductionToyota is the largest automobile manufacturer of the world. Toyota Corporation enjoys a global representation and is famous all over the world. The target market of Toyota is customers who have average income and want buy durable and reliable cars. Toyota caters to the demand of the medium income group people. Toyota sells its cars in a number of countries all over the world and also has manufacturing plants in many countries. The environment in which Toyota operates is becoming extremely tough every day. All businesses are facing problems today due to increasing costs, cultural diversity, globalization and decrease in global demand. The world has seen a great financial crisis in recent years and economies are still to recover from it fully. In such environment companies are finding it hard to produce and sell its product to customers. The external environment is also affecting organizations in new ways because media and communication technology has developed so much and any ethical issue can seriously hurt the reputation of the company. Competition is also increasing in business environment as companies are trying to innovate and market their products in better ways. In this report we will conduct an external environmental analysis for Toyota. We will talk about markets, competition and regulations that can have an impact on the company. The ethical issues, corporate social responsibility and environmental policy and its affect on Toyota will also be discussed. This paper will deal with the external environment and not with the strategy of Toyota. Markets, Competition and Regulation Markets are evolving at a great pace in today’s fast moving world and it is important to keep in mind the changing demand of target market. Competition is also increasing as companies are trying to increase efficiency by decreasing costs and improving quality of their products. Regulations are also getting stern everyday and automobile companies have to keep in mind the safety standards set by the companies. This means increase in testing of cars which will lead to greater costs. In this section the impact of markets, competition and regulation on Toyota will be discussed. Markets and its Impact of Toyota The main target market of Toyota is the middle class income group of the world. These are the people who cannot afford luxurious cars but want vehicles that are cheap but durable vehicles. Toyota provides cars to middle income people of the world and prices are also lower in comparison to BMW and Mercedes. Over the years this target market has been consisted as they cannot switch to expensive cars and they also don’t switch to cheaper manufacturers. This is why this market of Toyota was considered relative safe and loyal to Toyota. But this is changing because now the target market of Toyota is also evolving. The target market is demanding innovation in designs and specifications. The medium income group target market has become more aware of the different brands in the market. They have also become more design oriented and are demanding newer and better designs. Car movies and games have informed the market about fast cars and sleek designs therefore they want these things in their cars. This problem is staring Toyota in the face because design was never a strong point of the company and its focus was on durability and prices. Evolving markets are in this way impacting the business strategy of Toyota. The main strategy of Toyota is that of reducing service costs by giving customers quality and durability (Harrup & Janssens, 2008). This is causing problems because the markets of Toyota are evolving and they are demanding better designs from the company. The external environment is therefore impacting the strategy of Toyota. The increasing focus on design and specification of the market can decrease the demand of Toyota cars. Customers will look for new car manufacturers that can fulfil their demand and this can create problem for Toyota. Target markets are also getting sophisticated and are focusing on other aspects like marketing and safety of vehicles. The recent recall of Toyota cars has made the target market a bit aversive of the brand. Such incidents are reached to customers all over the world since internet and communication technology has developed so much. Bad reputation can also hurt the company as target market of Toyota has become well informed. When buying a car people take care of many things therefore sales are likely to affect as a result of any bad incident with regards to the brand. Sophisticated markets therefore are also likely to impact Toyota. Competition and Toyota Toyota is the market leader in automobile industry but many companies like Ford and Honda are trying to challenge its dominance. Asian markets are especially prone to competition because it is an emerging market. The demand is increasing because the population of Asian markets is increasing and standard of living is also increasing. Many companies are trying to enter in emerging markets and are coming up with newer cars. Companies are trying to cater to the demand of such markets and this is a challenging situation for Toyota. The recent brake problem and the recall fiasco have allowed competitors to capture some of the target market of the company. This situation can get worse for the company as an unanticipated loss in sales will result in higher costs and decrease in profits. The growth plans of the company will also suffer therefore competition is a serious external threat for the company. The company has been successful because of its cost leadership and durability. The clientele was also very loyal but with the increasing competition customers have a range of choices available. Other companies are also offering durability and Toyota is only ahead of its competitors because of its lower costs. This means that any sudden shift in demand can cause company many problems because it is finding it hard to differentiate its product with the competitors. Honda is also catering to local demand in smart way therefore differentiation is important due to competition. Competitors of Toyota are trying desperately to attract customers of Toyota who are disgruntled by the recent recall of cars. Ford and General Motors are offering incentives and rebates to customers who have suffered from the recall of Toyota (Hammonds, D. 2010). These companies are lowering prices in an attempt to capture the market of Toyota. In such a situation Toyota’s dominance is under serious threat in Europe and America. Ford and General Motors are also famous brand and they can offer the target market of Toyota what they want. The designs of their models are better than Toyota and this can attract customers. America and Europe is domestic markets of Ford and General Motors and they have served this market for a long time. People are still aware of their presence therefore the only place the disgruntled customers of Toyota will go is towards these companies. Toyota took the market share of Ford and General Motors, and these companies are trying desperately to win back their markets. Regulations and its Impact on Toyota Regulations are important in automobile sector as safety of cars is very important. Different countries have different agencies that formulate safety standards that are required to be followed by automobile companies. Car accidents occur all the time so it is extremely important for companies to design their cars in order to protect the lives of passengers. Regulations are also getting strict as technology is expected to provide maximum level of protection to consumers all over the world. So in today’s world regulations can have an impact on design of cars. Companies have to keep the safety standards in mind when designing their vehicle and this can increase costs and decrease efficiency because it will require more test drives and more research on the design of a model. Toyota is facing serious problems in meeting the safety standards in its vehicles. The recent brake problems and unwanted acceleration has created a bad name for the company. It forced Toyota to recall millions of its cars. The world sees Toyota as an automobile company that is not following regulations of safety agencies. This can cause serious problem for the company. Safety is the most important thing that consumers, especially in the developed world, and without it the sales of Toyota will plummet. Perceptions are very important in today’s business world and the world sees Toyota as an ‘unsafe’ vehicle after the recent debacle of brake problems. Strict regulations are expected in future and this can hurt the company because it will require more rigorous testing. More testing means increase in costs. It also means that designs will have to go through an audit and it can delay the launch of new models. Regulations can impact the automobile sector greatly and for Toyota it is important to take care of present and anticipated regulations. There is a tug of war going on between Toyota and the safety agencies of United States on safety of Toyota cars (Graig, I. 2010). This can lead to law suits and it will hurt the company. Ethical issues, Corporate Social Responsibility and Environmental policy With the increasing sophistication of consumers ethical issues are now treated as a significant element in the external environment of a company. Ethics are liked and appreciated by consumer globally and any unethical act can cause embarrassment for the company. Corporate Social Responsibility is another addition that has increased the obligations of companies towards general public. Companies today are expected to help poor people in order to attract customers and bring good name to the organization. Automobile companies and environmental policy are closely related to each other. The increasing focus on environment has forced to impact the policies of many automobile manufacturers. Ethical Issues and Its Impact on Toyota Ethics are now a part and parcel of corporate world. Consumers are aware of the every small detail about a company and any event that is deemed unethical directly affects the sales and popularity of the company. Ethics involves in business decision of companies today and inner environment of an organization should also take care of ethical issues. Any action that is unethical, forces people to switch brand and creates aversion in the minds of consumers. The relationship of companies with employees is also extremely environment for businesses. People in general look how companies treat their employees. Any gender discrimination in the work place can create serious problem for the company’s reputation. It is therefore important for companies to take care of ethical issues in the work place. A company like Toyota that operates at global level is more susceptible to ethical issues in work place because it employees culturally diverse workers. Toyota should therefore resolve any ethical issue with great care. Ethics should also be kept in mind when dealing with customers. Toyota should fulfill all its promises as an ethical company. Any miscommunication between the company and consumers can also tarnish the reputation of the company. Consumer ethics is an important dimension of any business today and in order to stop any violation of consumer rights correct information should be given to the customers. The recent brake problem of the company has also caused ethical problems for Toyota. It is being said that Toyota endangered the lives of its customers. This also comes under ethical violation of the company. Such issues can affect the sales and also the profits of the company in future. The durability claim if Toyota was defeated in the wake of the recall and that is why it is an ethical issue for the company. Toyota has accepted its fault (Weinstein, B. 2010) but still people are not accepting its apology. This shows the effect of ethical issues on a company. Ethics also involve providing right information to the stakeholders of the company. This is not only a matter of ethics but is also a law. Toyota is a public company so ethics are also important in this regard. Accurate information is the basic right of shareholders and ethics should be kept in mind here. Corporate Social Responsibility and Toyota Corporate social responsibility is another dimension social work by corporations. Today companies are expected to take part in social activities as an obligatory basis. Toyota is a large company so it is expected to help the poor community. CSR has now become a part of corporate culture and it is not discretionary but obligatory. Corporations usually indulge in activities that can help the poor people who live in areas where they operate. As the name suggest CSR is a responsibility so people expect companies to fulfill them. Toyota belongs to the Asian continent and it is a backward area with regards to human development. There are many basic problems in Asian countries therefore it is expected of Toyota to help the poor and the suffering more. By engaging in corporate social responsibility Toyota can help improve the situation of the people who live in Asian counties and can also associate its name with positive things. People like companies that do CSR so it can actually help the company by enhancing its brand image. The power of CSR cannot be ignored in today’s external environment. Environmental Policy and its Impact on Toyota There is a conflict of interest between automobile companies and environmental protection agencies for obvious reasons. Car pollution accounts for a major portion of environmental damage in the world. Governments are therefore becoming serious in enforcement of environmental laws. This can create serious problems for automobile manufacturers. Companies like Toyota will have to innovate in order to come up with vehicles which are environmental friendly. A strict environmental policy is not very far and companies should prepare for it. Environmental issues are also important for consumers as they have also become aware of the problem that the world is facing today. It has also become important for companies to pleasing their customers by preserving the environment. Environmental issues are highlighted ubiquitously and Asian countries are also now getting aware of the environmental issues. This is why it is important for companies to pay heed to the environmental concerns of the world and act accordingly. By focusing on environment companies can lower costs as well because conventional fuel prices are increasing everyday (Guardian UK, 2011). Companies should therefore see this as an opportunity not as a threat. External environment can force companies to innovate and that can help them in decreasing costs. Conclusion Toyota is a large company and it has a global presence. There are many external environmental factors that can impact Toyota. Markets of Toyota are evolving and their demand is becoming sophisticated. Competition and regulation can also impact the strategy of a company. Competition is increasing and regulations are getting tighter in the automobile sector. Ethics and CSR are also important in today’s world and corporations are expected to contribute in the society. Environmental policy is also a potent external environmental factor for automobile manufacturers as people are becoming aware of the environment problems. Bibliography Griag, I. 2010. The policy impact of the Toyota case. Automotive World. Accessed on July 26, 2011 from http://www.automotiveworld.com/news/oems-and-markets/80913-the-policy-impact-of-the-toyota-case Hammonds, D. 2010. Competitors target Toyota owners. Post-Gazette. Accessed on July 26, 2011 from http://www.post-gazette.com/pg/10029/1031920-185.stm Harrup & Janssens. 2008. Satisfying an evolving market. Fleet Europe Magazine. Accessed on July 26, 2011 from http://www.2fleet.com/pic_lib/grpc/pdf/grpc_pdf_00000364a.pdf Toyota car plant gears up for solar power. 2011. Guardian UK. Accessed on July 26, 2011 from http://www.guardian.co.uk/environment/2011/jun/07/toyota-car-plant-solar-power Weinstein, B. 2010. Toyota: Sorry Seems to Be the Easiest Word. Bloomberg Business Week. Accessed on July 26, 2011 from http://www.businessweek.com/careers/managementiq/archives/2010/02/toyota_sorry_se.html Read More