External Analysis: PEST Model
The automotive industry is subject to various governmental regulations, as well as taxes and tariffs. Political instability may adversely affect Toyota such as war, terrorism, labor strikes, fuel shortage, and interruptions in social infrastructure. An opportunity in this segment may lay in governmental support for eco friendly products.
Toyota’s operations are subject to currency, inflation and interest rate fluctuations that may result from an economic downturn. Prices increases in Toyota’s raw materials could put strong pressure on suppliers and negatively affect Toyota’s margins and profitability. However, Toyota also has opportunities in this segment. A weaker Yen vs. U.S. dollar could help improve its exports (Ferguson, 2017). Also, there has been a rapid growth of developing countries which Toyota may target to increase revenue.
Demographics and skill level of the population could affect the production of vehicles, especially as Toyota expands into emerging markets. Negative publicity and media perception of the brand can influence buyers. Toyota needs to ensure the health and welfare of its customers. Environmental implications are becoming more of a focus in the auto industry. Customer’s interests in hybrid and electric cars are increasing which can be a great opportunity for Toyota.
Research funding is a huge expense and is required to compete with the continuous innovations in the automobile industry. Toyota needs to stay ahead of competitors with competing technology. E-commerce is on the rise and Toyota has the opportunity to improve its e-commerce capabilities or to exploit third-party e-commerce service providers for sales of some of its products. Also,Toyota has the opportunity to enhance its mobile apps which could help increase customer engagement and loyalty (Ferguson, 2017).
- Human Resources- Toyota has a very large HR Department all over the world. They Invested large amounts of money to make this happen and they have had a great return on the end. As of December 2015, they have about 348,877 HR employees around the world.
- Innovative organizational Culture- While Toyota is advanced in its operating system and functional strategies, Toyota is on top with widely practiced management systems to learn manufacturing details.
- Diversification among Products- Although Toyotas big umbrella is Cars, there are many varieties such as Electric Cars, hybrid cars, SUV’s, and trucks. Not to mention how Toyota and its subsidiaries manufacture rubber and cork materials, steel, synthetic resins, automatic looms, and cotton and woolen goods. Some also do business in real estate, prefabricated housing units, and the import and export of raw materials.
- Advanced Technology- Toyota, as well being known as a car company, is also considered a true innovator company. To name a couple, their hybrid cars with “hi-fi Technology and their green vehicle technologies have been a huge success with customers. They are also in works with UBER and developing self-driving car technology.
- Strong Brand Image- One of the most important points of Toyota’s growth and success.
- Dependence on Suppliers- Although Toyota has suppliers around the world, they depend on them all heavily. This creates a soft spot in their production lines and may cause delays.
- Market Passiveness- Although Toyota has developed green vehicle technology, they have failed in launching it where the market will effetely catch on. If implanted correctly, China and India would be the best launching sites for this technology at this time.
- Negative Publicity- This occurred after the 2014 massive recalls due to the fatly airbags.
- Poor Brand Recognition- Although Toyota has 4 Brands (Toyota, Hino, Lexus and Daihatsu) Most would only recognize Toyota and Lexus due to their American foothold.
- Growth of developing Nations- With prospective changing, people feel more inclined to buy cars than ever before. The demand for cars in developing countries has increased drastically over the past few years.
- Green Vehicle Technology- although the green cars are a bit slower, they are slowly gaining popularity around the world. This is a great opportunity for Toyota if they can find out a way to market it.
- Growing concern for Environmental Pollution- People all around the globe are becoming more concerned about the environment. With people becoming more willing to do their part there is a great opportunity in the market!
- Number of competitors - Competing with names like Ford, Mitsubishi and Volkswagen, Hyundai and Chevy it can be hard to make a strong impression in the market.
- High-priced Raw Materials – The raw materials costs are rising immediately effacing the cost of the ending products.
- Exchange Rates- The constant threat of rising exchange rates is always a large factor. When transferring from Dollar to Yen and Vice Versa it can lower profits. (Bhasin, 2018)
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