There are a number of techniques that can be employed to understand the business environment. This paper applies the Porter’s Five Forces and the PESTLE analysis to Toyota Company. The Porter’s Five Forces analysis is a technique that helps the organisation to understand the market because it focuses on five forces that affect the performance of an organisation (Porter 2008).
On the other hand, the PESTLE analysis is a technique that focuses on the environmental factors around the business’ operation (Murray-Webster & Williams 2010).
Analysis of the Micro and Macro Environments of Toyota
Porter’s Five Forces
Threat of new entrants- Toyota is a company that does not face much threat of new entrants because it is not easy for new companies to join the automotive manufacturing industry, mostly due to the high initial capital that is required and stringent industry requirements.
Threat of substitutes– this refers to the number of products from other companies that are available and can serve the same purpose. There are many substitutes to Toyota products, given the many numbers of competing companies in the automotive industry. Therefore, Toyota faces a relatively high threat of substitutes. However, the company is able to produce high quality vehicles and sell at low prices to overcome the competition.
Bargaining power of customers- Toyota does not face the high bargaining power of customers because the company produces a wide variety of car models and sells at a relatively low price. Consequently, customers are not able to bargain too much.
The bargaining power of suppliers– The suppliers do not have a high bargaining power, given the fact that Toyota buys raw materials in bulk. Moreover, it is too expensive for suppliers to switch to Toyota’s competitors, which gives Toyota a competitive advantage.
Competitive rivalry– several companies compete with Toyota in the automotive industry. This poses a competitive rivalry to Toyota. However, the company is able to produce differentiated cars. In addition, Toyota is able to produce both cheap and expensive cars and maintain good quality at the same time. This reduces the threat from the competitors.
PESTLE
Political- Toyota operates in many countries that have different political principles and ideologies. Political stability is one of the issues that may affect the performance of Toyota in respective countries. Toyota will thrive in a stable political environment. The rules governing tax and legal requirements in the respective countries of Toyota operations may also affect its activities positively or negatively.
Economic– Toyota will perform well if the economy of the country of operation is good. On the other hand, a poorly performing economy will translate into poor performance for Toyota.
This is dictated by the amount of disposal income that the citizens have. The recent global economic recession also affected the company’s performance negatively as individuals preferred to spend on necessities, instead of luxurious commodities like cars.
Social-cultural- there are societies that believe that owning an automobile is a sign of prestige and status. Toyota is likely to perform well in such societies. The lifestyle of societies, as well as the norms may also have an effect on Toyota. For instance, societies where the main mode of transport is the use of small cars would be a perfect market for Toyota’s small car models.
Technological- the level of technology has advanced in the last couple of years, which has caused a positive effect on most business organisations. Toyota is able to produce highly innovative products by employing up to date technology. This gives the company a competitive edge, while lowering its operating costs as it can produce using the latest and efficient technology.
How the International Business Environment Impacts Toyota
Toyota is an organisation that operates in the global market. Consequently, it is affected either directly or indirectly by the international business environment in different countries. The international economic factors also affect the company’s performance.
The fact that there are many other international organisations in the same industry also means that there is a high level of competition for Toyota internationally. Generally, the international environment increases both opportunities and threats for Toyota.
Benefits, Opportunities, and Challenges of Globalization to Toyota
Globalization helps Toyota to reach and create a large consumer base. This increases its chances of making high sales and profits in return. Globalization has also been a contributing factor to the company’s increased innovation because Toyota is able to access more technology through innovation.
One of the major opportunities that are presented by globalization to Toyota is a high propensity to grow and increase in terms of size and revenue. However, globalization also brings challenges to the company.
For instance, Toyota has to deal with a high level of competition as more organisations join the international market due to globalization. This leads to increased spending and reduces profitability as the company finds ways to counter the competition. Loss of customers to competitors is also a challenge because it reduces profitability.
Structures of organisations in the international market
The organisations operating in the international market are normally large and complex in nature. Normally, multinationals are divided into regions, whereby each region has a regional manager.
The regional manager oversees the company operations in a region, normally a country, and they are answerable to the overall manager or the CEO. The company can have different departments in each region, based on products or customers. The company can segment its market based on the various customer needs and assign a manager to each segment to facilitate organisational competitiveness.
Corporate Social Responsibility
Moral and ethical issues faced by operating in an international environment
Moral and ethical issues refer to the right and wrong behaviour that an organisation is expected to choose or not to choose (Wall 2012; Horton & Roche 2010). The major moral and ethical issues that an organisation faces in the international market include employment issues, environmental pollution, and human right issues.
In the case of employment, work conditions in one nation may be different from those in another nation (Rendtorff 2009). The organisation may want to pay the same wages and offer the same work conditions in all its branches, which may not be ethical in some nations (Horrigan 2010; Keinert 2008).
Organisations are expected to operate without polluting the environment, or act in responsible ways in response to the environmental impacts they cause. Questions of human rights have been raised in many countries because there are many nations that human rights are not respected by multinationals.
Conflicts between Corporate Strategy and Ethical and Social Responsibilities
Ethical and social responsibilities are activities that tend to reduce the profitability of the organisation (Benham 2011). This creates conflicts between the two strategies (Dringoli 2011).
In fact, some organisations opt not to be ethically and socially responsible because it affects their profits and contradicts their corporate strategy. However, it is argued that social and ethical responsibilities give the organisation a competitive advantage in the long run.
Regulation and Guidance Relating to CSR for Organisations
Organisations are expected to follow specific rules in the international environment. For instance, there are labour Acts, human right Acts, environmental Acts, as well as codes of conduct for the different organisations in different nations (Levi-Faur 2011). These rules vary from one nation to another, thus an organisation is expected to be flexible to adapt to each whenever it internationalizes its operations.
Reference List
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