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Factors influencing the business environment of toyota

This report aims at understanding the business environment and the various factors that influence the business environment of a company. The main objective of the report is to evaluate the various challenges faced by Toyota Motor Corporation (TMC) over the last 5 years and how the company dealt with those challenges. To achieve the aims and objectives of understanding the business environment of TMC, SWOT analysis will be conducted on Toyota Motor Corporation. The analysis will be followed by conclusions and recommendations for Toyota Motor Corporation.

Introduction

Business Environment is defined as a set of various political, economic, social and technological forces which impact business processes of an organisation in a positive or a negative way and these forces are largely out of control of the business organisations. It involves both the internal and external environment of an organisation and refers to those aspects of the surroundings of business enterprise which have influence on the functioning of business (Jain et al. 2006).

The Business Environment can broadly be categorized into two different categories of:-

1. Micro Environment ' The internal factors or elements that are close to the company and are under the immediate area of operation of an organisation which have a direct impact on the performance and organisational strategies constitute the Micro Environment of a business enterprise. Micro Environment is also known as the operating environment of a company and may include Suppliers, Customers, Shareholders, Competitors and Media (Jain et al. 2006).

According to Philip Kotler, Micro Environment refers to the operating environment of an organisation and consists of the factors within the immediate environment which affect the business processes of the organisation. Some components of the micro business environment are discussed below:-

a. Suppliers ' Every business organisation requires suppliers to supply raw materials and components to the company. An organisation should look for a reliable supplier of raw materials and components and should have multiple suppliers providing them with the materials required since it is a risk to depend on a single supplier (Jain et al. 2006).

b. Customers ' Every business revolves around customers. The success of any business depends on the identifications of its customer groups, their needs, tastes, etc and also by providing high levels of customer service. Companies should segment their customer markets and supply those goods that best suits the segment of customers identified (Jain et al. 2006).

c. Competitors ' Organisations have to modify and adjust their activities based on actions and reactions of its competitors. In order to have competitive edge, organisations need to understand the strategies formed by their competitors and respond timely by modifying their strategies to be the leader (Jain et al. 2006).

2. Macro Environment ' The external and uncontrollable factors that affect the performance, strategies and decision making power in an organisation are known as Macro Environment Factors. The Macro Environment include the forces that create opportunities and pose threat to enterprises and constitutes economic, demographics, legal, political, social, technological and environmental factors.

a. Economic Environment ' Economic Environment refers to the economic factors such as the economic system and policies, nature of economy of a country, trade cycles, level and distribution of income which impact the working of business enterprises (Jain et al. 2006).

b. Political Environment ' The political environment of a country greatly affects the business processes of an organisation and this environment may include political ideology of government of a country, Centre State relationship, etc. If there is lack of political stability in the country or region of operation of a business enterprise, long term plans cannot be formulated due to frequent changes in the policies of the government and leads to uncertainty in business (Jain et al. 2006).

c. Social Environment ' It refers to the influence of certain social and cultural factors on an organisation. The factors affecting the social environment of an organisation are usually beyond the control of the company and may include factors such as attitude of people to work, religion, caste, etc (Jain et al. 2006).

d. Technological Environment -The fast advancements in the field of technology creates problems for business enterprises as these make plans and products of the company obsolete. The business companies should evaluate and analyse the changes in the technological environment quickly and should be able to adapt the new technology (Jain et al. 2006).

All these factors or elements create opportunities and posses threats to the business. Therefore, the elements of macro environment of a business enterprise directly impact the performance of a company in a positive or a negative way (Jain et al. 2006).

In order to understand the business environment of an organisation to generate successful strategies and plans while keeping in mind the threats involved and various opportunities available, companies use the PESTLE analysis technique as this enables them to understand the various external factors that have a direct impact on the performance of the organisation. This analysis provides an insight on the macro environmental factors such as Political, Economic, Social, Technological, Legal and Environmental factors affecting business organisations and this helps in decision making for a company.

Organisations can also use SWOT analysis which helps them to understand their strengths and weaknesses and also helps in analysing the opportunities or threats for the company.

Company Information and Background

Toyota Motor Corporation (TMC) commonly known as Toyota is a multinational company founded by Kiichiro Toyoda as an independent company in 1937 and is headquartered in Japan. Toyota Motor Corporation group companies are Toyota, Lexus, Daihatsu and Hino Motors. There are several non-automotive companies as well which form the TMC. The company mainly deals with manufacturing of automobiles with factories in six continents around the world and is the world's largest automobile maker in terms of sales and production. Apart from manufacturing automobiles, TMC also provides financial services through its Toyota Financial Services Division and also deals in building robots. Fortune Global 500 companies for 2008 listed Toyota as the fifth largest company in the world (Toyota Website).

(The First Toyota Model AA, online http://en.wikipedia.org/wiki/Toyota accessed on 25/07/2010)

Toyota Business Environment

Every company, irrespective of the nature of the business they are dealing with, is exposed to various factors which influence the changes in the company and also influences the decision making and strategies of the organisation. It is of great importance to companies to keep themselves updated on these factors in their business as they greatly influence the strategies and plans within a company which in turn affects the overall performance and position of the organisation.

Challenges faced by Toyota Motor Corporation

Toyota Motor Corporation being a company with global presence has faced various challenges and has been exposed to various forces that have impacted the plans, strategies and decisions of the company and also impacted the automobile industry as a whole. Some of the challenges faced by Toyota are listed below:-

' Toyota has presence all around the world and supplies automobiles to almost every country on the globe. The company has to deal with high competition since the worldwide automotive industry is highly competitive and Toyota faces strong competition in the respective markets it operates. The factors that affect the competition include the product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service and financing terms. Toyota has always been offering best in class products to be the world leader and the products manufactured by Toyota always had a leading edge over competitors and the same was evident when company was awarded number one in global automobile sales for the first quarter of 2010 (Toyota Website).

' Toyota being the world's number one car maker with a turnover of over $17 billion in 2008 was hit hard by the economic downturn that started in autumn of 2008 in the US. The main reason for the impact on Toyota Motor Corporation was the fall in the consumer spending during the downturn. The global presence of TMC and also the other division of TMC such as financial services and biotechnology helped the company to survive during the economic slowdown. Also the company cut down on many of its temporary as well as permanent workers and also cut down on car production as a response to the economic downturn (Ezin Articles).

' Toyota recalled around 4 million Camry Solara and Lexus vehicles since there was unintended acceleration problem discovered in this model of automobile manufactured by TMC. The problem was related to unintended sudden acceleration of the vehicle by itself while driving on slow speeds. This lead to many accidents and also resulted in death of few customers. This was a serious issue in the manufacturing of the car and the company recalled all Camry Solara's manufactured during that time as safety measure to fix the problem for the customers. Also as an interim solution to the problem, the company advised all its customers to take out any removable driver's floor mat and not replace it with any other floor mat until a vehicle based remedy was developed to address the issue (Toyota Website). The company has now been able to identify the cause of the unintended acceleration problem and is focusing on developing and testing the remedies of the problem. TMC is also working with their pedal suppliers CTS on a revised design that effectively remedies and resolves the problem (Toyota Website).

' Since November of 2009 till the first quarter of 2010, the company had recalled over 8 million of various different car and truck models manufactured by Toyota Motor Corporation in the USA for brakes and acceleration related issues. The company was penalised for USD $16.37 million by the US government for its delayed response to notify about the defect to the National Highway Traffic Safety Administration. The company halted it sales and production of new models and utilised all energy and resources available to identify the cause of the problem and resolve the same. In a recent press release, the company acknowledged that the cause of the problem has been identified and the corrective actions and steps are being taken to remedy the problem (Toyota Website).

' In order to respond to the customer queries and the problems faced by the customers, Toyota Motor Sales USA, Inc. Announced in July 2010 that they are expanding their Product Quality Field Office Program through which more Field Offices will be established with the mandate to investigate specific field quality issues related to unique regional, geographical or environmental conditions in each area. These offices will also provide technical service and support to dealers and regional field staff. Company has taken this step to help ensure their customers that they are a quality-focused and responsive organisation and that they are ready to provide assistance to their customers and address issues whenever required (Toyota Website).

Despite of various problems that the company has dealt with, Toyota has always focused on resolving those issues and being focused on serving their customers in the best possible manner.

In order to understand the Business Environment in details, SWOT analysis will be performed on Toyota Motor Corporation that will provide us the details on the Strengths, Weakness, Opportunities and Threats in Toyota's Business Environment.

Strengths

Global Presence and Customer Satisfaction ' Toyota Motor Corporation has worldwide presence with production plants in 6 continents around the globe. TMC is one of the largest automobile manufacturers in the world and has always worked on providing highest standards of customer service and addressing issues to all customers. This high level of customer service at all Toyota plants, dealers and service centre has enabled them to be the market leader in automobile industry and despite of various issues being found in their products, the company has been able to retain its position as a global leader and also received a top ranking gin the Fortune list of Global Most Admired Companies where TMC was named the most socially and environmentally responsible automaker (Toyota Website).

The primary and major strength of Toyota is the quality product that it manufactures to offer to people. The initial price to purchase automobiles manufactures by Toyota may not be affordable by people as compared to other automobile manufacturers however the company is still able to succeed and grow because of their quality products which are reliable and dependable. And it is only because of reputation of the quality products manufactured by Toyota that the company has been able to achieve the position of number one carmaker in the world in the year 2007 and retained in 2008 (Toyota Website).

Toyota Motor Corporation manufactures large range of automobiles and this diversified range with highest standards of quality helps the company to serve both the private customers and the commercial organisations, thus capturing almost all sectors of the market (Toyota Website).

Weaknesses

Toyota is one the leading and the biggest automobile manufacturer in the world. The company manufactures large range of vehicles to serve different market segments in different countries around the globe. Since the world market for cars is in a condition for oversupply, the company needs to understand the demand of customers in a particular country depending upon demographics of the country and preferences of the people in that country in order to capture the market and increase customer base. The company has worldwide presence however TMC markets its products mainly in the US and Japan and the economic and political situation in these countries greatly affect companies plan. The company needs to continue focusing on these markets and at the same time enhance marketing of their products in other emerging economies as well (Toyota Website).

Toyota currently manufactures products that meet the demands of the customers. However, along with satisfying the current needs, TMC also needs to focus on building a legacy for their products and the company. The company needs to invest and work on building dream machines while continue to work on meeting the current demands (Leikanger 2006).

Opportunities

Toyota Motor Corporation has the reputation for manufacturing automobiles that are eco-friendly with less emission and therefore helps in protecting the environment. Eco-friendly vehicles from Toyota are based upon the advanced technology that has been developed by the company itself. The rising oil prices and awareness to protect the environment from pollution has resulted in increase in the sale for hybrid vehicles. With development of more advanced models and designs for eco-friendly automobiles, the company has the opportunity to set the standards for hybrid vehicles (Toyota Website).

Also, the global presence of Toyota provides advantage to the company to expand themselves in the growing economies such as China, India, etc. TMC needs to recognise the population in such countries and manufacture products that suit the people of the country (Toyota Website).

The brand image of Toyota also provides the company with an opportunity to capture the 'urban youth' market. The company has launched few new models such as Aygo that specifically are manufactured taking into consideration the wants of the young people and it attempts to capture the youth segment of the consumer market. Toyota has adopted effective marketing techniques and also provides credit assistance and helps in customising automobiles as per demand of the youth at a low cost which no other competitor is able to offer. This could prove to be the greatest opportunity for Toyota in the future (Toyota Website).

Threats

The threats to Toyota are mostly related to economic stability. The economic slowdown and recession has affected the sales of the automobiles that are manufactured by the company in the Americas and the other parts of the globe as well. This has significantly impacted the company in the international market as well. In such situations of economic slowdowns, the consumers try to save every single penny and buying a new car becomes almost impossible for the general public (Ezin Articles).

The company had to recall many of its sports utility vehicles and pickup trucks due to problems reported in the front suspension systems. The company did not reveal the cost involved in the recall however while manufacturing the vehicles, the company needs to rigorously test their automobiles since it's a matter of safety of the customers buying those manufactured vehicles. Also such recalls involve huge costs and penalties, therefore the Toyota needs to be focused on maintaining the image of the quality products they manufacture. This will help the company in retaining and expanding in markets worldwide (Toyota Website).

Toyota also faces tremendous competition in the car market. The level of competition is increasing day by day with new car manufacturing companies entering into the market from different countries of the world. Company needs to adopt plans and strategies to be the market leader worldwide. Also, the company needs to continue manufacturing quality products that will help in maintaining the reputation of the company and also needs to offer new products in the market in order to serve the demands and wants of the customers (Toyota Website).

Conclusion

Toyota Motor Corporation being one of the leading companies in the automobile manufacturing industry has dealt with several challenges over the past few years. These challenges which were mainly related to technical issues in the manufacturing of cars resulted in recalls of the manufactured automobiles from the market and impacted the reputation of this leading company. Since the company is highly customer centric, TMC spent huge amounts in order to resolve the problems in the automobile that were already sold out to customers and also provided timely updates to all its customers. The company also made sure that the cause of the issue was analysed deeply and that it was fixed so that such issues can be prevented in the future and the company is able to retain its position of being the global market leader in the automobile industry.

Recommendations

Toyota Motor Corporation should implement more stringent in-house quality checks on the production of all of its automobiles. This would help in detecting any technical faults in the manufactured automobiles while the product is still within the company and has not been sold out to customers. By implementing more severe quality checks, the company can save on huge costs involved in recalls and detection of problems and most importantly, it will help Toyota Motor Corporation to retain its position of being the market leader at all times.

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