PESTEL analysis of automobile company Toyota

Lexus is a Japanese company, which produces automobiles. This company was founded by director of TOYOTA concern Eiji Toyoda in 1989. There are some key people in Lexus history like, Kazuo Ohara, Vince Socco and etc. Lexus was introduced for the first time in 1989 in the USA. In present, Lexus is the large-selling Japanese make of premium cars. Lexus’s vehicles are marketed in 70 countries. Lexus is one of the most successful brands in Japan. The headquarters of the company is located in Toyota, Aichi, Japan, but there is a have the branch in Brussels, Belgium and The USA.

Lexus originated from a clandestine flagship sedan project that began in 1983. This effort developed into the original Lexus LS, which was the first vehicle to wear the Lexus brand upon its launch in 1989. In following years, Lexus added sedan, coupe, convertible, and SUV models. In 2005, a hybrid version of the RX crossover debuted, and additional hybrid models were subsequently introduced to the Lexus line-up. In 2007, Lexus launched its f marquee performance division with the arrival of the IS F sport sedan.

From the start Lexus was produced in Japan on the Toyota’s factory and in its own factoriess in Chubu and Kyushu. The first outdoor factory was created in 2003 in Canada. Further, it was new factory in the USA which is the largest outside factory of Lexus.

The first Lexus project was implemented in 1983, when the chairman of Toyota motors Eiji Toyoda posed the question: “Can we create a luxury vehicle to challenge the world’s best?” This project had the code-name F1 (“Flagship”+number 1), the project’s aimed to create Lexus LS400. It is a flagship sedan, which was the first step of a new Premium car producer in Japan.

Total sales and production

Regional sales, 2009

Units

Japan[83]

28,167

Europe[84]

25,921

United States[74]

215,975

Type production, 2009

Units

Passenger vehicles

222,684

Crossover SUVs

96,610

Hybrid vehicles

60,625

Line production, 2009

Units

Japan production[85]

255,012

Canada production[86]

64,282

Total

319,294Nowadays, Lexus is one of the biggest auto concerns in the world. The main competitors in Japan are its elder brother Toyota and another famous brand Nissan. Lexus although, is very popular in the USA, because the most successful in sale this cars is United states. The table to the right shows that 215,975 Lexus cars were sold in the United States. In 2009, Lexus ranked 16th in the list of TOP 100 Brands of the world. It is the big progress, because only two years ago Lexus ranked 31st. This year, the main competitors of Lexus are Mercedes-Benz, BMW, Toyota, and some other big companies. Otherwise, Lexus has 10th place in the top 20 most preferred brands in the world. In conclusion, the facts demonstrate that Lexus has been developing extremely fast in the last three years.

Entry 2. Effect of Economic Environment

The Gross Domestic Product (GDP) in Japan expanded at an annual rate of 1.1 percent in the third quarter of 2010. From 1980 to 2010, Japan’s average quarterly GDP growth amounted to 0.55 percent reaching an historical high of 3.15 percent in June of 1990 and a record low of -4.45 percent in March of 2009. Japan’s industrialized, free market-oriented economy is the second-largest in the world. However, Lexus recovered its sales in the beginning of 2010 and determined an equilibrium price.

This graph shows that there was a dramatic decline in GDP growth rate in the middle of 2009, which means that overall income level of population was very low and people did not buy so many Lexus cars. Still, the next whole year the GDP growth rate started to stabilize and rose gradually reaching a point of 1.5 in January 2010. Then, the income level in the United States has risen, which affected all firms including Lexus.

Last time the benchmark interest rate in Japan was reported at 0.1 percent. Interest rates have a direct impact on the credit market, because an increase in interest rates makes borrowing more expensive. By changing interest rates, they try to maximize employment, stabilize prices and achieve a good level of growth. As interest rates drop, consumer spending increases and this, in turn, stimulates economic growth.

The inflation rate in Japan was last reported at 0.2 percent in October of 2010. From 1971 to 2010, the average inflation rate in Japan totaled 2.97 percent reaching an historical high of 24.90 percent in February of 1974 and a record low of -2.50 percent in October of 2009. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures overall inflation of the domestic economy. According to the data, inflation seems to be high, which means that Lexus is willing to raise their prices in home market and of course in the world.

The next point of view is Japan’s exchange rate. In 2010, this indicator has been growing, so the losses of seven biggest auto concerns amount to more than ten billion dollars. Lexus was in this group.

Entry 3. Effect of Industry Environment

The Japanese automotive industry is one of the most famous industries in the world. Japan was the world’s largest vehicle manufacturer in 2008, but has lost this position to China in 2009. It is home to a number of companies that produce cars, construction vehicles, motorcycles, ATVs, engines, and others. Japanese automotive manufacturers include Lexus, Toyota, Honda, Daihatsu, Nissan, Suzuki, Mazda, Mitsubishi, Subaru, Isuzu, Kawasaki, Yamaha, and Mitsuoka.

Although Japan’s economic recovery has sent the Nikkei stock market index to five year highs, it has yet to regain confidence of car buyers. In 2005, auto sales in Japan fell 0.9 percent, while sales at Toyota (including the recently introduced Lexus brand) dipped 3.2 percent. Honda did almost as badly registering a 2.9 percent decline. While Nissan managed a relatively healthy 2.2 percent increase, the prognosis for 2006 did not look much better.

Toyota Motor Corp.’s profit per vehicle in China for its luxury Lexus brand has surpassed that of the USA, where it has been forced to increase incentives following record recalls earlier this year. Even after China’s import duties and higher taxes on luxury cars, Lexus currently earns more per car in the world’s largest auto market, said Karl Schlicht, head of the marquee’s global product and marketing division. Premium pricing in China and the higher incentive spending in the USA are also factors, analysts said. Toyota introduced the Lexus brand in 1989, specifically for the USA market. Lexus sales in China, which began in 1993, will rise about 50 percent this year, Schlicht said. Deliveries totaled about 30,400 units in 2009, according to researcher J.D. Power & Associates. Sales increased by 7.7 percent to 201,769 in the USA, the brand’s biggest market, this year through November.

The introduction of the new sporty CT 200h hybrid-only model will boost deliveries in China next year. Lexus, the top-selling luxury-car brand in the USA since 2000, trails behind rivals in China, selling about 20 percent of luxury leader Volkswagen AG’s Audi brand and a third of Daimler AG’s Mercedes-Benz and Bayerische Motoren Werke AG’s deliveries this year. In China, importers pay a 25 percent custom duty and a 17 percent value-added tax. Consumption tax, which can reach 40 percent, is based on the car’s engine size, said Lin Huaibin, an analyst at industry consultant IHS Automotive in Shanghai.

For a Lexus GX460 sport-utility vehicle, which starts at 1.16 million yuan ($174,000) in China, Toyota charges a premium of almost $70,000 after taxes, Lin said. The same vehicle has a base price of $52,345 in the USA

The Lexus LS600hL, the brand’s flagship hybrid sedan, has a base price of 2.07 million yuan ($311,000) in China, compared with $110,000 in the USA.

Prices for other luxury automakers also are also higher in China. Rolls-Royce Motor Cars Ltd., BMW’s most luxurious nameplate, prices its Phantom sedan from 6.6 million yuan ($990,000), compared with a starting price of $380,000 in the USA.

A stronger yen against the dollar is also cutting USA profit for Lexus, which exports all models from Japan except the Canada-built RX SUV. Every one-yen appreciation against the dollar cuts Toyota’s operating profit by 30 billion yen ($357 million) as the yen-value of repatriated earnings falls.

According to Toyota’s recent report, USA Lexus sales dropped 1.4 percent in November, compared with a 30 percent surge at BMW and an 8.4 percent gain at Mercedes-Benz. Lexus still holds the lead this year through November.

The company more than tripled incentive spending per vehicle in October 2010 from a year earlier and almost doubled them in November 2010, states Autodata Corp. Higher expenses on incentives means Lexus models may comprise approximately a third of USA’s operating profit, down from as much as half in the year through March 2008, said Koji Endo, an auto analyst at Advanced Research Japan in Tokyo.

The automaker, based in Toyota City, Japan, has been struggling to recover its image after recalling Toyota and Lexus-brand models, including more than eight million vehicles worldwide for problems relating to unintended acceleration.

Entry 4. Effect of Political and Legal Environment

According to one Canadian reviewers, the USA have played a major role in specific treatment in Lexus. Its economy has done so well as a globalizer due to geography, a multicultural population and a large number of immigrants, efficient capital markets, an honest transparent legal environment, the most flexible labor markets in the world – especially relative to Europe and Japan, a free flow of information. However, its weaknesses include crime-ridden inner cities, an evident lack of gun control, widening income gaps, under-funded public schools, a culture of litigation, too much money, consumers living beyond their means, and global arrogance. Many Canadians would state that their own country has even more strengths and fewer weaknesses for a globalized world than our neighbors: one-third of our jobs and 41% of our economic output already depend on exports of products and services.

Alumni from Toyota Motor Corp.’s executive ranks are scattered like seeds: in the government, in Japan’s leading business lobby group, on company boards such as Sony Corp.’s. Last year, 48% of all new standard passenger vehicles sold in Japan were either a Toyota or its luxury Lexus brand, according to the Japan Automobile Dealers Association.

Entry 5. Effect of Socio-cultural environment

There are a lot of social and cultural threats in automobile market. For example, Americans are becoming more interest in cars. They are concerned about quality, performance, class and brand’s name. So the American’s dream is “a car or may be two in every garage”, it means that United States is the best place for car sales. The fuel in America less expensive than in Europe, which means, that this market can buy not only small cars with small fuel expenses, but the big pickups, crossovers, jeeps and other big cars, that they like very. This is a favorable situation for Lexus’ all roaders and crossovers. The statistic shows that in recent years the most profitable region for Lexus sales is the USA.

Furthermore, in Europe, mini cars or hatchbacks which are very fuel-efficient are very popular. This is due to narrow streets and high fuel prices. Although, we have such problem, like environmental. In Europe, there are very strict laws for CO2 emission from cars.

Third World like Vietnam, some countries of Africa and countries with narrow roads and densely populated countries like Malaysia rank last in this regard. They favor small bikes, scooters, bicycles and moving on foot. They have the lowest sales of cars.

Entry 6. Effect of Ethical Environment

The main principal of Toyota Motors (including the Lexus brand) is to benefit society through its business activities, which founded on a long-term perspective. Toyota believes that improving corporate value in this way will not only benefit shareholders, but also lead to greater trust in and understanding of the company over the long term.

Toyota prioritizes active distribution of profits to its shareholders in its management policies and continuously strives to increase per share earnings. At the same time, it attempts to enhance and strengthen corporate structures and continue to be active in developing its business.

According to various sources, it is vital for Toyota to timely convey corporate and financial information to shareholders and investors, so that they are able to easily make their investment decisions.

Entry 7. Effect of Technological Environment

Lexus is famous for its high quality and cutting edge technologies, so their new cars feature plenty of technological innovations. The brand’s motto is IDEAL, which stands for “Impressive, Dynamic, Elegant, Advanced, and Lasting”. It is an embodiment of ever increasing progress. Lexus sticks to its targets. It encompasses all details like design, aerodynamics, vehicle line and etc. Vehicle cabins have incorporated touch screen navigation system interfaces, a smart key entry and start up system, SmartAccess and electroluminescent Optitron gauges. Lexus has become leading among the top premium car brands to equip its models with premium audio systems. Lexus was first to launch the production of eight-speed automatic transmission in an automobile with the LS 460 and the gearbox was later adapted for the GS 460 and IS F models. The company works to continuously introduce versatile transmissions, regenerative brakes, and electric motors on all Lexus hybrid models. Lexus executives signaled intentions to equip further models with hybrid powertrains to meet the demands for a decrease in both carbon pollution and oil dependence.