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TOYOTA CASE STUDY - JUNE 2009 521 ASSESSING THE MARKETING ENVIRONMENT P.E.S.T.E.L AND S.W.O.

T ANALYSIS
The Toyota Motor Corporation is the worlds biggest car producer. Founded in 1937 by Kiichiro Toyoda the company has seen rapid growth and evolution ever since and has developed to be one of the worlds best known car manufacturers. The Toyota group has spread its business across 170 countries ever since its inception and has sold vehicles under various brands which include Toyota, Lexus, Daihatsu, and Hino. The company has 52 companies manufacturing vehicles and parts in 26 countries and regions. Toyota had approximately 300,000 employees at the end of 2007.

P.E.S.T.E.L ANALYSIS POLITICAL ANALYSIS:


The business of Toyota is spread across 170 countries. The company faces various political issues as is it has to interact with governments of different kinds. Seeing the current world scenario and the phase of recession that the world is going through the UK government is providing much of a help to the car makers located in the UK including Toyota. The government would provide funding to car manufacturers of upto 2.3bn in support of the low carbon emission initiative taken up by the companies. This would indeed help the government and the British government to be the leading player in protecting the environment and taking the first step towards low carbon emission. Another political development that would help the car makers during the time of recession is the introduction of incentives. Like the other EU countries the UK government is likely to give incentives to car owners to scrap their old vehicles (which are a certain years old) and have high carbon emission and replace them with new fuel efficient models. The scheme is revenue-neutral for the Treasury, because the financial incentives are offset against the VAT generated by increased sales.

ECONOMIC ANALYSIS:
As Toyota conducts business worldwide on of the risks that it faces is the economic instability of many regions. The demand for cars is rapidly declining due to the downturn in the world economy. It is projected that the overall European sales in automobiles would fall by 30% in 2009. This is the biggest slump seen in past 35 years recovery of which would take 3 4 years. Another area of concern is the rapid rise in the fuel prices and reduction in supply. This would lead to increasing demand of more fuel efficient cars (like yaris and corolla). One of the steps that is adopted by the company to support its low demand due to economic downturn is GLOBAL LINK PRODUCTION SYSTEM. In this plants with low operating rates take up production from plants with high operating rates.

Toyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese yen, the US dollar and the Euro and, to a lesser extent, the Australian dollar and the British pound. Changes in foreign currency exchange rates may affect Toyotas pricing of products sold and materials purchased in foreign currencies. In particular, a strengthening of the Japanese yen against the US dollar can have a material negative effect on Toyotas operating results. Toyota believes that its increased localised production of its products has reduced, but not eliminated, the effects of interest rate and foreign currency exchange rate fluctuations, which in some years can be significant.

SOCIAL ANALYSIS:
The company constantly aims at helping the society by creating employment opportunities and concentrating on customer satisfaction. It aims at retaining the permanent employees. Even at the time of recession the company is not aiming at retrenchment of employees but seeks to reduce costs to cutting of working hours and days. cutting working hours by 10% and moving to a three- or four-day working week closing one of its UK plants for three months and giving staff just five days pay voluntary redundancies Apart from this the company not only aims at making safer vehicles but also aims on reducing injury to people as much as possible and has adopted strategies like the Safety Basic Concept . The worldwide automotive industry is subject to various governmental laws and regulations, including those related to vehicle safety and environmental matters, such as emission levels, fuel economy, noise and pollution. Many governments also regulate local content, impose tariffs and other trade barriers, taxes and levies, and enact price or exchange controls. Toyota has incurred, and expects to incur in the future, significant costs in complying with these regulations. New legislation or changes in existing legislation may also subject Toyota to additional future expense

TECHNOLOGICAL ANALYSIS:
With the use of technology comes innovation. Today to survive in the global market firms continuously need to keep on innovating and come out with better products. Toyota also aims at long term innovation to propel growth. Technological capabilities not only in product development but also in production engineering will be the most important factor for future success. Advanced technology development, particularly in the fields of the environment, energy, and safety, is a responsibility as an automaker and a precondition for survival amid ever-increasing competition. By rigorously developing such technologies ahead of their competition, Toyota wants to take on the challenge of realizing dream cars that make the air cleaner as customers drive them and cars that avoid accidents and injury. Toyota recently identified hybrids as a core technology that will contribute to the solution of environmental issues.

To cater to energy diversification among regions, Toyota follows a strategy of providing the right vehicle for the right place at the right time by developing environmentally friendly technologies or deploying eco-cars that reflect the infrastructure and customer needs of each region. Last year Toyota concluded an agreement with Isuzu Motors Limited for the joint development of diesel engines that place even less burden on the environment. Also, in Brazil, where bioethanol is a widely used fuel, Toyota recently launched a flexible-fuel Corolla that runs on pure bioethanol.

ENVIRONMENTAL ANALYSIS:
One of the major environmental issues that the world faces is exhaustion of fuel oil. Apart from this plenty of other issues are surrounding the world. High carbon emission, global warming, carbon dioxide emission apart from this noise pollution is also of serious concern. Toyota is responding to energy and global warming issues by promoting measures to reduce CO2 emissions in both the development and design stages, as well as during production and logistics, while also taking action to improve traffic flows and promote reforestation planting trees to offset carbon emissions. In response to increasing environmental concerns, Toyota is planning to offer a hybrid version of every model it produces by 2020, and has forecasted that hybrids will be the mainstream car in ten years time. By 2030 there will be another oil price shock and petrol will become prohibitively expensive but by then cars that run on alternative energy whether from biomass, liquid coal and gas, nuclear power and renewable should be developed. In order to improve resource productivity, Toyota is promoting the effective utilization of resources, reducing water consumption, and encouraging the development of designs for recycling.

S.W.O.T ANALYSIS STRENGTHS:


Toyota motor company is one of the worlds largest producers of automobiles. The demand for its vehicles is constantly rising around the world because of the high brand name that the company has acquired through the years. One of the major strengths of the company is its belief in TOTAL QUALITY MANAGEMENT or T.Q.M.. This practice of the company aims at perfection at all stages of the working environment and lays stress even at the minute details. Toyota also follows a policy of Customer First which gives it an edge over the other companies. This helps them in retaining customers as they provide maximum customer satisfaction. The company constantly innovates according to the needs of the world and wants of their customers. The company comes up with new and improved models of their automobiles in adequate time intervals to satisfy various types of customers and meet the world needs and customer wants.

The company also maintains a healthy relation with the its ever growing workforce and also aims at retaining the permanent employees as much as possible during slowdown without much effect on their cost. Catering to the world environment needs Toyota produces a large number of environment friendly models that run on alternate sources of energy and create less pollution.

WEAKNESS:
Toyota motor company relies more heavily on the domestic production of the vehicle. It produces more than two thirds of its vehicles in Japan and the remaining in its affiliates spread over 25 countries. About 38% of the domestic production was exported. This invariably would increase the costs of cars. Toyota motor company should therefore systematically spread its distribution of production of cars across countries catering to the demands and needs of the people of that country. This would thereby help in cost reduction and increase of profits through maximization of sales.

OPPORTUNITIES:
With the growth in the world economy car ownership market is predicted to rise around the world rapidly. There are huge potentials in the markets of Brazil, India, Russia, Taiwan, and Indonesia. By 2010 ownership is predicted to rise by 1 billion vehicles lead by these countries. By producing fuel efficient and low priced models the company can considerably increase sales in these countries and increase its market share. Toyota is the first motor company to take a step ahead in developing eco friendly models of cars. Thus they have an edge over their competitors in terms of experience on production of models that run on alternate sources of energy. This would give them a competitive advantage when the world would be in the rapid need of such models as oil reserves would decline and there would be a considerable increase in the prices of oil.

THREATS:
The current economic slowdown is posing a serious threat to all kinds of industries world wide. One of the ways to tackle this downturn is to reduce production costs and produce goods only sufficient to meet the demand. A slump of 30% in sales is expected during the recession period. Growing competition is another threat that the company is facing around the world. Constant innovation and production of more fuel efficient models and models that run on alternate sources of energy would help them tackle the healthy competition faced by them. The production of low priced fuel efficient models would help them increase production in countries like India, Brazil, etc.