International Marketing: Toyota Motors Corporation - Case Study Example

INTERNATIONAL MARKETING by of the of the of the School December 15, Introduction Macroenvironmental analysis, “is an integral part of systematic strategic planning” (Smit, 1999, p.83). Social, economic, technological and political forces are classified under Macro environmental analysis, these forces are sometimes referred to as the PEST (Political, Economic, Social and Technological) (Babette and Fleisher, 2008, p.169). These forces provide many opportunities as well as many threats in the business organization. “several opportunities, threats and strategic issues arise from the convergence of the economic interdependence of the global economic market, the desire of firms to increase their scope of operations, and the social and economic dislocations from shift in the demographic sector” (Stonehouse and Campbell, 2004, p.57). Below is a table that shows the PEST and what they entail: Political/Legal Economic Factors Employment law Inflation Environmental policies GDP and GNP growth rate Socio-Cultural Factors Technological Factors Age Distribution Technology Population Mobility Production Technology People`s Lifestyle Source: Fyall, Alan and Garrod, Brian, 2005, p.58. Analysis of these areas involve, “the study of current and potential change and the assessment of the impact of changes on the organization” (Smit, 1999, p.84). Macro environmental analysis plays a major role in the systematic strategic planning, but nevertheless it may cause problems in management. William Dill stated that, “one of the primary problems facing the effective use of macro environmental analysis is the fact that we don’t understand completely the concept of environment” (Smit, 1999, p.85). There are four major macro environmental analysis that closely correspond: 1. Scanning the macro environment; this analysis helps in warning, and any environmental changes that can affect the activities of the business. It also involves evaluating, monitoring, and distribution of information that comes from the internal and external environment (Orcullo,2008, p.148). 2. Monitoring the environment that is used for specific trends and patterns in business. 3. Forecasting the future direction of environmental changes. 4. Assessing current and future trends that will affect the organization and some of those changes that would have an effect on the organization. Macro environmental analysis can also be termed as remote or general environment analysis. This is because of how it affects around all organizations, and how strategic managers have no influence or have little influence over the environment (Stead, Garner, and Starik, 2004, p.56). Macro environmental managers’ main focus should be the need to evaluate variables that will play a major role as the market drivers for the future of the organization (Lowe and Doole, 2005, p.54). This means that managers need to focus on the factors that will have the greatest influence on the market for many years to come. When these factors have been spotted, it is very vital to make sure one assess their impacts on the market process, after that the company needs to evaluate the different drivers, if they are favourable or unfavourable to their chosen market or product. The global macro environmental analysis has a great influence on the development of individual national condition, but this means that each country has its own unique set of macro environmental conditions that are related to the country’s history and development (Stonehouse and Campbell, 2004, p.144). The main purpose of macro environment analysis in the global market is to identify similarities and differences between countries. The company chosen was Toyota Motors Corporation, a motor car corporation in Japan, and the country of choice is Japan. Toyota Motors Corporation is based in Japan (New York Times, 2012). Rivalry and conflict that arises from the departmental intra-firm environment is a problem, but can be controlled within the management (Reynolds and Lancaster, 2002, n.p.). The uncontrollable external forces present the company with both opportunities and threats.. The macro-environment consists of people, the company, and forces that are immediate to the firms external environment. Let’s focus on the external forces that affect the company. These are for example the suppliers’ environment, the supplier’s role is to provide the firm with raw materials, components, and services or general finished products. The company generally relies on the suppliers, and the suppliers rely on the future success of the company for buying the firms orders (Reynolds and Lancaster, 2002, n.p.). In Toyota Motors Corporation, the supplier’s environment started with the establishment of `just-in-time` and it has been universally used in flow-line production situation. Suppliers play a vital role in the company, because the management demands total reliability that the suppliers will deliver the goods that are per standard. In 2000 many consumers had concerns about the rising gasoline prices in the country. Toyota realised that concern and took steps to change the macro-environment, and it was at this time they established an environmental-friendly car (Gunelius, 2009, p.53). Toyota used a strategy that was based on the macro-environment and this made the company to experience less losses during the economic turndown. Political factors These are factors that have the greatest influence as compared to the other factors. Political factors deal with how or the degree to which government interferes with the organization (UKessays.co.uk, 2003). The political factors include government regulations, stable government, tariffs, and government economic policies. Toyota Motors is a worldwide carmaker, which has been affected by the politics in different countries. This is because of the oil shortage in some countries like the United States, which relies on foreign oil to fulfill their demand (powerfulwords, 2003). The Government issued an energy saving policy that made the consumers to turn their demand to the Toyota oil saving product, like the plug-in hybrid (powerfulwords, 2003). This was not long until the governments of unfriendly countries, interfered with Toyota`s operations, using political threats in order to boost their local manufacturing companies. An example is the Venezuelan president, Hugo Chavez, who stated that the government of Venezuela would take over the Toyota local industry. This brought a disagreement as Toyota refused to transfer their new technology to local manufactures, and to produce more vehicles that are designed for Venezuela`s rural areas. Economic factors These are factors that impact how the business is run, and its decisions. Economic factors include interest rates, exchange rates, and inflation rates (UKessays.co.uk, 2003). Due to the global economic crisis, Toyota decided to narrow down its scope of business and base its focus on the core business. Therefore, Toyota decided to withdraw its support for the formula one racing competition, and in turn focus its attention on its vehicle manufacturing (UKessays.co.uk, 2003). With the global economic recovery, Toyota has continued to increase its output in the global market; with many countries experiencing growth in their economies, this provided Toyota with a chance to develop new products in new markets. For example, Toyota aims to occupy more than 10% of the Indian car market by the end of 2015. Social factors These are factors related to the society. Business can’t grow without the society, reasons being that the society is part of it. Social factors include demography, population growth, and company image (UKessays.co.uk, 2003). Any change in the social factors greatly affects the demand and supply in an organization. Socio-cultural factors have had an effect on Toyota in one way or the other. Toyota have led in product quality had they have achieved a good image in many societies, through social activities in different locations worldwide. For example, the Toyota project in Kirloskar Group for the drinking water for the Karnataka peoples (a state in South India). These social activities and projects have solved the social problems for the locals. Consequently, Toyota has earned respect and cooperation from the local people, and created a good image for them (powerfulwords, 2003). Technological factors The use of technological factors means that the company has to continue advancing its technology, so as to better their products. The technological factors help to build the company`s image in competition. Technological factors include automation, global communication, and rate of technological change. Toyota`s success has not been easy, however, modern technology has boosted this factor. With the new technology, Toyota`s future is developed. A good example is its use of the `Lithium-ion-battery` (powerfulwords, 2003). Technological errors can however cost billions of money to a company. The problem Toyota faced in 2009 caused a recall more than 15.2 million vehicles, this was as a result of technological errors that caused accidental acceleration in some of Toyota’s vehicles manufactured during the time. The use of technology in the wrong way had made Toyota lose its reputation, and its reliability. The market entry strategy can be defined “as the plan developed by a company to enter a new market or sub-market” (Levi, 2006, p.34). Market entry strategies cover areas like buying, market knowledge, entering of joint ventures, and selecting the market segment and region of operation. If any organization has the desire to enter in more than one foreign market, these factors will depend on the international strategy. The international strategy defines “the target foreign market and the priorities in entering them” (Levi, 2006, p.34). When a company decides to go international, it has to come up with a decision on which market to enter in. The company needs to define its target, how it will expand, and the planned approach (Tielman, 2010, p.3). There are many reasons why a company goes for international markets. Reasons may be reactive, meaning that the company gets information about a new or foreign market, and wishes to venture into that market. Reasons may also be proactive, meaning that a company decides to act in advance, in anticipation for the future. Toyota has become the biggest automaker in the world. This is due to the fact that it has had positive action in the market entry and an effective competition in international markets (Gunelius, 2009, p.230). Toyota used the foreign direct investment strategy to get to international markets. Foreign direct investment strategy “is money that is invested in companies, property, or other assets by people or organizations from other countries” (Cambridge Dictionaries Online, n.d.). It can also be referred to as “organizations ‘acquisition and operation of assets in a foreign country” (Gunelius, 2009, p.25). Toyota entered the United States market through a joint venture and Greenfield investment. A firm may use direct investment by acquiring another company`s interest. Toyota has used direct investment in new plants and equipment’s. For example, in India Toyota has acquired a very small market share, but they are planning to build a manufacturing facility (Lamb, Hair, and McDaniel, 2010, p.168). In 1980, Toyota and general motors had a vision to have a joint venture of the Toyota cars in the United States. Toyota became the operating branch for the joint venture, and it used the Japanese supplies, and enriched them in United States (Harrigan, 1985, p.320). Toyota hoped to learn about the United States labor environment through the joint venture, but this wasn’t easy because the venture received critics, which called for federal action against the Japanese imports. General motors were worried about the Japanese management technique being used in the United States Toyota, which was granted the power to use their programs and methods. However, Toyota had a different opinion, they wanted to hire autonomy and power to use their own methods and work rule. In 1984, Toyota and Daewoo Corporation of South Korea had a joint Venture to produce cars for exports to the United States, such as the joint venture between Toyota and Daihatsu in China; this paved way for Toyota to secure a market share in China (Luo, 2000, p.187). Toyota made a decision to invest in Daihatsu, with this opportunity Toyota took advantage of the business connection, this joint venture led to their current venture with Tianjin Automotive Industrial Corporation. Toyota has used joint ventures to get into many international market shares, and this has created a great image for the company. In conclusion, macro environment analysis is an integral part of systematic strategic planning. The macro environment is controlled by three forces namely; social, technological, and political forces. The forces are sometimes referred to as PEST. These forces provide the room for opportunities and threats. The analysis involves the study of current and potential change, and the assessment of impact of changes on the organization. There are four major macro environmental analyses that closely correlate. These include scanning the macro environment, monitoring the environment, forecasting future direction of environmental changes, and assessing current and future trends. The country of choice in this paper is Japan, and the company is Toyota Motors Corporation. Toyota Motors Corporation is a Japan based company. Rivalry and conflicts do arise within the company, but the management is able to handle this. However, there are other uncontrollable external forces, which present the company with opportunities and threats. The macro environment consists of the people, the company, and forces that are immediate to the firm’s external environment. Some of the external factors that have faced Toyota Motors Corporation are like the suppliers ‘environment. These are the people who provide raw materials, components and finished goods. Toyota has definitely had to depend on the effectiveness of suppliers for their growth. Nevertheless, there are macro environmental factors that affect Toyota Motors Corporation. Some of these factors are like technology, social, political, and economic factors. As discussed in the context, it is clear how these factors affect Toyota Motors Corporation. Every company has a desire to venture into international markets and have come up with strategies to venture into these markets. Toyota Motor Corporation has used the joint venture strategy and foreign direct investment strategies, to penetrate to international markets. Toyota has over the years overcome forces within the internal and external environment, which have threatened the survival of the company. It can’t be concluded that Toyota Motors Corporation has had a smooth business operation; but it has succeeded in overcoming the problems that have faced it over the years. Reference List Bensoussan, E. B. and Fleisher S. C., 2008. Analysis without Paralysis: 10 Tools to Make Better Strategic Decisions. New Jersey: Pearson Education, Inc. Cambridge Dictionaries Online, n.d. Foreign Direct Investment. [online] Available at: [Accessed 15 December 2012]. Doole, Isobel and Lowe, Robin, 2005. Strategic Marketing: Decisions in Global Markets. London: Thomson Learning. 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