External Environment of Toyota Motor Corporation - Assignment Example

Essay Planning Name: Institutional affiliation Essay Planning for the External Environment of Toyota Motor Corporation Introduction The Reasons why I Chose Toyota Toyota is the largest firm in the automobile industry across the world controlling more that 18% of the total automobile market across the globe as of 2011. Toyota is one of the first companies to felt the impact of globalization as it was trying to venture into the international market, especially in the US. Toyota has both competitive and comparative advantage over other players in the automobile industry because it is the largest automobile firm. The low cost of Toyota Vehicles has given it comparative advantages over other automobile industry players from other countries that have not established the economies of scale and improved technologies. Main Issues that are pertinent to Toyota Stiff Competition in the automobile industry: The automobile industry is large, and it has matured with many competitors that pose a threat to the Toyota. The competitors compete for various consumer segments, and the consumers are always loyal to their chosen brands. Toyota’s main competitors include Volkswagen, Ford, Honda and General Motors. Increased liberalization of the automobile market There are very limited legal barriers preventing new entrants in the industry. It is very easy for the new entrants to access the motor suppliers and distributors, posing a threat to Toyota. However, it is hard for the new entrants to attain the economies of scale and wide network, especially the small entrants. However, the threat of entrants is considered to be low. The new entrants in the industry Coda Automotive, Tesla Motors, Fisker Automotive, and Saba Motors. Effects of Globalization on Toyota First, Global market forces have forced the company to engage in malpractices that pose threat to the consumers Second, the increased number of counterfeit vehicles parts has led to the cause of the global crisis. For instance, Toyota blamed Chicago Telephone Supply Company for the woes of faulty accelerators Thirdly, the increasing number of multinational corporations and weak regulation agencies has hindered most governments from monitoring the big companies. Higher Number of Substitutes Many people and government policies now prefer environment-friendly substitutes like such as bicycles and electric vehicles There are also many alternative and faster means of transport like trains and electric trains preferred by the public Substitutes do not offer the same convenience as the vehicles manufactured by the Toyota. Trade Blocks Regional economic integration affects Toyota’s accessibility to the international markets that have regional protections. Toyota has much regional and international economic and political integration that have helped it to access the international market, leading to its high margin profit. For instance, its home country Japan is a member of APEC, which has enabled Toyota to Access the markets of the 21 member countries of APEC. Global Climate Change There is increased awareness and environments advocating for the green energy due threat of the climate change. Increased pressure for environmental conservation has forced Toyota to invest a lot of capital and time towards the environment conservation Toyota has invested on green technology which has improved its international reputation, and it has increased its comparative advantage. Sources of Information 1. Nunes, B., & Bennett, D. (2010). Green operations initiatives in the automotive industry: An environmental reports analysis and benchmarking study. Benchmarking: An International Journal, 17(3), 396-420. The journal analyzes the green operation initiatives taken by various firms in the automobile industry, including Toyota. The world has been facing environmental challenges like global warning, and there is increased international debate about environmental conservation. Some of the key projects taken by the world leading automobile players like Toyota include green building, green manufacturing, and green supply chain (Nunes & Bennett, 2010). 2. Maxcy, G. (2013). The Multinational Motor Industry (RLE International Business). Routledge. The book is essential in this essay because it helps in understanding the concept of economies of scale in the automobile industry and how it affects operations in the industry. It also discusses the foreign direct investment (FDI) of major players of the automobile industry in the developing countries. “In the automobile industry, a dozen giant enterprises produce the great bulk of world’s output of vehicles outside the communist countries…” (Mexcy, 2015, p. 15) 3. Dunning, J. H. (2014). The Globalization of Business (Routledge Revivals): The Challenge of the 1990s. Routledge. The book is important in this essay because it helps in analyzing the emerging trends in the international production. The book helps in understanding the theory of international production The book helps in explaining the relationship between the comparative advantage of various countries and the different multinational corporations in the automobile industry. The book also explains the relationship between the host governments and the multinational corporations 4. Segarra-Oña, M., Peiró-Signes, A., & Payá-Martínez, A. (2014). Factors Influencing Automobile Firms' Eco-Innovation Orientation. Engineering Management Journal, 26(1), 31-38. The journal is important in understanding the significance of investing in the eco-innovation by the automobile firms. “Eco-innovation plays a central role in moving toward a sustainable economy and society, since it enables increasing value for producers and consumers while reducing environmental impact” (Sagarra-Orna et al., 2014, p. 31). 5. Ahmadian, A., Hassan, A., & Regassa, H. (2013). THE IMPACT OF OIL PRICE FLUCTUATIONS ON THE AUTOMOBILE INDUSTRY. International Journal Of Business & Economics Perspectives, 8(2), 35-43. The journal helps in understanding how changes in price have influenced the type of vehicles manufactured by various automobile manufacturers. It will also help in discussing how Toyota has gained competitive and the comparative advantage due to its fuel-saving vehicles. 6. Mittal, A., Mitra Mukherjee, P., & Roy, D. (2013). Global Competitiveness: World Passenger Car Industry. SCMS Journal Of Indian Management, 10(4), 75-85 The journal is important in this essay because it is going to help in understanding how global competition and increased technological changes have changed competition in the automobile industry. “Globalization and trade liberalization along with the easy flow of information and advancement of communications technology have resulted in an increase of market competition worldwide” (Mittal et al., 2013, p. 1). 7. Nkokmo, T. (2001). Analysis of Toyota Motor Corporation. Retrieved from http://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf The internet source is going to help in the analysis of the external environment affecting the automobile industry. 8. Essays, UK. (November 2013). Toyotas Competitive Advantage in the Automotive Industry Marketing Essay. Retrieved from http://www.ukessays.com/essays/marketing/toyotas-competitive-advantage-in-the-automotive-industry-marketing-essay.php?cref=1 The source is important for this essay because it helps in understanding the competitive advantage of the Toyota in the automobile industry. It contains in-depth analysis of the competitive advantage of Toyota, which is essential for this essay. 9. Rapp, W. (2000). Automobile: Toyota Motor Corporation. Retrieved from file:///C:/Users/hp/Downloads/WP_177.pdf The source is going to help in understanding various aspects affecting Toyota because it covers both the internal and internal factors affecting Toyota, including issue of international concern Research Question What are the main international trade issues in the automobile industry affecting the performance, growth and development of Toyota Motor Corporation? Essay Plan Introduction Background information on the international factors affecting trade in the automobile industry, especially in Europe and the US A brief overview of the major firms in the automobile industry, focusing on General Motors, Ford, and Volkswagen. Background information about Toyota. Brief history growth and development of Toyota. The main purpose of the essay (Thesis statement) Body of the Essay Competition Toyota has a competitive advantage in the automobile industry in the entire world due fluctuation of oil prices It manufactures vehicles that do not use a lot of fuel, which makes customers prefer its vehicles due to the cost of fuels Fluctuation in fuel prices made the company overtake General Motors, and it is now the largest company in the automobile industry The company also enjoys the economies of scale and wide network because it was one of the firms to enter the industry. The new entrant’s n the industry does not offer much competition to the firm because they do not enjoy economies of scale like established companies like Toyota Toyota dominates the because it controls the largest share of the international market Generally, the threat from competitors, especially the new entrants is considered to be low. Despite the high a competition in the industry, Toyota still has competitive advantage. Imperfect Competition Toyota is operating in the automobile industry facing imperfect competition Individual player in the industry has the ability to affect the prices of products charged in the industry Toyota needs to be a price maker in the automobile industry and not price taker if it wants to stay ahead in the industry. Other players in the industry will follow its prices giving it a competitive advantage over other players. Comparative advantage Toyota has a comparative advantage in the automobile industry it is already established It uses the best and the latest technology in manufacturing its products The company also enjoys the economies of scale and wide international network It dominates the global market making it more established, thereby enjoys a comparative advantage in the industry. Effects of globalization on Toyota i. Positive effects of globalization Increased liberalization across the globe has enabled Toyota to access the markets that were once protected For instance, when it first entered the US market, its vehicles were not allowed in the US market because consumers preferred them did not use so much fuel compared to those produced by the General Motors in the US then. Globalization has also enabled the company to strengthen its comparative advantage in the automobile industry. ii. Negative effects of globalization Toyota has suffered some challenges due to globalization The major challenge is increased competition as competitors can now easily access market due to little protection of the host countries in the international Global pressure has also made the company engage in some practices that have damaged its reputation. Specifically, there has been complaining of faulty accelerators that have led to a lot of accidents and even death Toyota has recalled a significant number of its vehicles due to customer complaints Its competitors have used the numerous complaints to gain competitive advantage. Effects of Natural Disaster Toyota has been affected by the natural disasters that have been taking place in Japan In 2011, Japan experienced both earthquake and Tsunami that affected its entire economy 50% of Toyota production take place in Japan and its contributes about 8% to the Japanese GDP Toyota forced to stop production for about one month due to the natural disaster in Japan Impacts of Climate Change There is increased numbers of environmental movements, organizations and activists championing for environmental conservation The company has invested a lot of capital in green technology Toyota has come up with Full Cell Technology cars and Hybrid cars, which are environmental friendly It has established Toyota Earth Charter, which it uses in recycling through cutting edge technology. Substitutes in the Industry Increased debate and concern about environmental degradation has made people start shopping for environmentally friendly means of transport Cities in developed countries are also investing a lot in air transport as an alternative means of transport to reduce traffic jam, which is common in major cities Air is also more convenient and faster Conclusion Toyota dominates the automobile industry, and it has overtaken General Motors Most of the international trade theories like new trade theory, comparative advantage and competitive advantage they apply to the automobile industry Some of the international trade issues affecting Toyota include stiff competition, comparative advantage, globalization, international environmental issues, and a wide variety of viable substitutes. Toyota is affected by international issues that are inevitable. Read More