Abstract
Brexit has affected the United Kingdom in a way that leaves many foreign investments at risk. Toyota is among companies whose assets are severely threatened by the changing relationships in Europe. There is a dire need for change, which can be derived from current obstacles for the continuous existence of Toyota UK division, which includes its focus on the import of parts and immediate export of finished cars (McAleer, 2019). With no capacity for storage and the lack of a free trade agreement, Toyota is left with no choice but to usher the UK’s government by taking decisive actions. In the meantime, the firm is left with the need to avoid the untimely collapse of its supply chain by covering its most vulnerable parts. Attaining short-term goals will allow the division to eventually stabilise the situation and cooperate with the government on questions of its regional operations. There are certain risks involved in this process, yet without taking them, a significant portion of Toyota’s competitive advantage will be lost.
Introduction
One of the most famous car manufacturing companies, Toyota is a Japanese firm that received worldwide renown decades ago. As known in its current form, Toyota Motor Corporation was established in 1937 (Toyota in the world, no date). Its products are assembled in numerous factories across the globe, including the United Kingdom. Nowadays, the company is fighting for its spot in a highly competitive scene as the global vehicle market continues to expand rapidly.
Purpose of This Project Report
With the recent changes in the political landscape of the United Kingdom, Toyota has found itself on the brink of losing this portion of the market. To avoid being overrun by its competitors, the company needs to take drastic actions in accordance with the rapidly shifting situation in the country. This paper will analyse the newly established barriers for Toyota in the UK market and suggest a path to change the company’s approach to securing its spot in the country with minimum resistance.
Project Background and Objectives
The influence of political factors on markets can be rarely compared with the vehicle industry. The separation of the United Kingdom and the European Union, known as Brexit, had a profound effect on many industries, especially ones that were relying on imported parts (Winton, 2020). While the overall impact of this event is not as detrimental as it was once expected, the market is being actively reshaped by new factors that were not present while the European Union’s connections were utilised (Britain’s car industry is finding Brexit far less of a problem than expected, 2021). It is now necessary to determine future actions for Toyota, whose competitive ability is put to the test with this political shift.
The goals of this project are to examine the limitations imposed by outside sources on Toyota and propose a change management plan for the company. The PESTEL analysis will be conducted for the analysis part, while the plan for change will be created by using Kotter’s 8-step change management model. General recommendations on Toyota’s situation are intended to assist its stakeholders in viewing their way out of the crisis clearly.
PESTEL Analysis
The vital part of this discussion is the relationship between the UK, the EU, and Japan. Several other Japanese car manufacturers have decided that Brexit breaks the EU-Japan free-trade deal and makes the UK market unsuitable for their factories (Holweg, 2019). Due to the changes in imports, Toyota is met with harsher tariffs on export, which creates a slew of issues down the production line (McAleer, 2019). While detrimental, these factors produce an opportunity as well.
Economical Factors
It is expected for the UK markets to become highly volatile for a short period after Brexit. With 70% of all cars sold in the country being imported from other European countries, the sudden shrinkage presents an excellent opportunity for Toyota to rapidly capture more ground (Humphreys and Munro, 2019). However, it does not mean that the permanent state of the UK’s economy will be greatly affected by this decision.
Social Factors
Changes in society are closely following the situation in the EU. This rift can effectively cause several of Toyota’s primary competitors to struggle with keeping their positions on the UK’s market intact. The primary obstacle here is the new barrier for immigration that can prevent essential experts from reaching Toyota’s facilities in time to create a timely response for a crisis or train local teams.
Technological Factors
It is worth noting that one of the famous Toyota car lines is produced in the UK’s factories. Local factories that produce parts for Corolla supply many parts of this car line, making it one of the strongest sides on which the company can capitalise (Our Products, no date). The research and development division continues to evolve this design and keep pace with Toyota’s competitors.
Environmental Factors
After Brexit, there are many concerns over changes in this sector of constraints. The country acknowledges the need to grow its internal market, which would also put the local environment in danger (Burns, 2020). However, EU policies were weighing hard on the country’s manufacturing sector (Burns, 2020). Their alleviation can allow Toyota to negotiate new options with the UK government, providing a slight set-off in increased import costs.
Legal Factors
It is expected that the number of legal changes can cause a significant stir in Toyota’s plans in Europe after Brexit. There is an uncertainty in regulations for car manufacturers, causing some of Toyota’s competitors to cease their operations (Leggett, 2020). However, with the UK’s clear intention to focus on internal production, the industry may receive a substantial boon in the nearest future to support companies that decide to stay in the country.
Change Objectives and Principles
There are several objectives that can be identified for Toyota’s stability in the UK car market. The scope of change will primarily affect Toyota’s structure, processes, and external communications through changes in leadership, although its human resources will be inevitably shifted as well. A shared vision is a necessary part of solving such a problem, as a complex structure of the organisation disallows it to operate without a consensus (Beer, Eisenstat and Spector, 2011). Short-term performance can be improved within a matter of months with sufficient delegation and understanding of the goal among managerial personnel (Kotter, 2012). Therefore, Toyota has to adapt to the current situation while aiming for a more general goal of improving its standing in Europe through the UK.
It is in Toyota’s best interest to keep its factories in the UK operational because the number of the company’s manufacturing facilities in this region is already low. Moreover, with such an investment in the local infrastructure and human resources, the firm cannot merely abandon its projects (Is Brexit the end of Toyota UK manufacturing?, no date). Systems within the organisation are highly interdependent, putting communication at the head of all operations, as confusion is common among complex structures such as the Toyota UK division (Kotter, 2001). Keeping it within the company’s principles of support for all employees and excellent customer reach, leadership strategies may be required to be updated.
Change Management
With a slew of issues stemming from decreased mobility across the region, the company faces issues with managing the situation in this environment. The eight-stage process proposed by John Kotter (Figure 1) is a suitable method for developing a plan in resolving Toyota’s imminent crisis. Its application would allow the firm to shift its vision towards the necessary direction and address short-term difficulties related to its current position on the market.
The first step is already being taken, as Toyota’s representatives highlight the urgency of the issues stemming from Brexit. It was necessary to call for the company’s overhaul of its operations in the UK (McAleer, 2019). Officials have warned the government that even a small disruption in the import of parts may halt production, causing the company to lose millions alongside its competitive advantage (McAleer, 2019). The second step – involving stakeholders in the change process – is also underway, as Brexit’s conditions are being discussed by both government and the company’s officials, who also seek new ways to transform the company (Trudell and Philip, 2020). However, the following steps require additional input from all stakeholders.
The next step ushers updates to the company’s vision and strategy to be outlined. The vision of the company remains unchanged, although the strategy requires adjustments. As of now, there are several points for short-term improvement, including negotiations with officials for economic relief and vehicle warehouse capacities, that can assist Toyota. Communicating these goals alongside reassuring messages to employees whose careers are put at stake is the next step of Kotter’s change process. It is essential that workers are set on this path through direct task assignments that align with the change direction, while only senior managers deal with more abstract goals (Beer, Eisenstat and Spector, 2011). Therefore, communicating the vision to them through their direct managers must be performed in accordance with Kotter’s suggestions.
The fifth step may cause temporary slowdowns yet remains a vital part of the change process. While the lack of expenditures on storage is a benefit for Toyota’s operations, it punishes any changes to the existing structures. This obstacle must be alleviated, and other ideas from all hierarchical levels of the firm must be explored for their feasibility. The sixth step requires the execution of the plans regarding the company’s structure that is ill-suited for periods of uncertainty. Logistical paths must be calculated by new teams responsible for these temporary storages and their operations.
However, transformation does not end on temporary adjustments and the acceptance of unfavourable conditions. Short-term solutions are mere responses to the ongoing uncertainty, and their effects must be replaced by sound strategies that facilitate cooperation between Toyota’s leaders, employees, worker unions, and governmental organisations. Promoting those who support this path is a sure way to consolidate the selected direction for Toyota UK. The final step is to solidify the company’s new organisational culture by appointing leaders who are able to create all necessary channels for communication.
Undoubtedly, there are risks involved in this process, as Toyota’s infrastructure is being tested. Governmental policies regarding environmental factors are subject to change in the following years, as the current lack of anti-climate change incentives is not an ideal state for Britain (Burns, 2020). Without a clear path towards the free trade agreement, the firm faces unknown territories where the lack of timely resolution may require significant downsizing or the entire relocation of its UK division.
Stakeholder List
Obviously, Toyota’s head management has two reasons to strive for the plan’s success, as it can help the company to dominate both the UK and the EU car markets via local manufacturing facilities. Their actions define regional relationships and decide whether proper communication with the UK government will be established. As the economic situation in the country is destabilised by Brexit, Toyota UK department employees are one of the most involved parties in this change. On the example of another Toyota factory closure, it is possible to see that the company highly values its employees and attempts to capture human resources within itself (Is Brexit the end of Toyota UK manufacturing?, no date). There are many well-trained specialists who work for Toyota, and the rapid closure of car manufacturing firms in the country will harm them greatly.
The UK government also has a shared interest in this endeavour. As the threat of a temporary economic downturn stemming from Brexit turns into reality, authorities should seek all possible solutions to dwindling markets and boost companies’ confidence in their secured positions. The last party in this process are the European customers, who will otherwise see an increase in prices for both parts and new cars.
Change Performance Measure
With Kotter’s change management model in place, Toyota can expect to reshape its regional department to suit its importing capability to the company’s needs. Currently, the company exports approximately 50 cars per day while creating 950 engines on its second facility in the UK (McAleer, 2019; Is Brexit the end of Toyota UK manufacturing?, no date). The key performance indicators for the local factories must be upheld and can be used as the measure of the success of proposed implementations.
Recommendations
It is highly recommended for Toyota to focus on its previously underdeveloped capabilities as a local car manufacturer. Toyota Corolla is already partially constructed with parts made locally within the country, yet further improvements to this supply chain can drastically increase the firm’s chances for success in the region. Moreover, the local economy and employment require the company’s investments now more than ever. As saving its human resources is a key goal for Toyota, acting upon this claim is a paramount objective. It can be achieved by cooperating with worker unions and asking employees for their decisions.
It is apparent from the PESTEL analysis that Toyota has an opportunity to take charge in supporting the local economy and establish a base for its operations in Europe, especially considering its manufacturing facilities. By ensuring a positive relationship with the local government, Toyota can increase its productivity and alleviate the increased costs of importing parts and exporting cars into Europe by striking personalised deals with the UK. Instead of leaving the market entirely and allowing its competitors to take a greater hold on such a large customer base, Toyota can negotiate terms for a new agreement akin to the free trade agreement it had prior to Brexit.
Discussion
Surviving through a period of uncertainty is a primary challenge for the company. However, there is a framework for supporting foreign investors that can assist Toyota with keeping its revenue at an expected level. In fact, British regulations, in comparison with those in the EU, are more lenient towards foreign investments (Britain’s car industry is finding Brexit far less of a problem than expected, 2021). Moreover, the issue with lobbying among carmakers to promote locally produced cars is no longer an obstacle, unlike the situation with Germany’s apparent advantage on the EU market (Humphreys and Munro, 2019). Nonetheless, Japanese carmakers remain heavily reliant on British tariffs that are imposed by the World Trade Organization.
While the projected income for Toyota UK appears to present a straight downturn, this is a result of dealing with uncertainty rather than direct losses from Brexit’s impact. Investing in Britain appears as a risky choice, yet with sufficient parts produced locally, this issue can be alleviated with a gradual transfer of production processes to local facilities. At the same time, Toyota also has little to no capacity for storing its products prior to their export or sale (McAleer, 2019). Stalling factories’ processes even for a few days can result in drastic losses for the company. It is paramount for Toyota UK to immediately seek contact with governments to refresh their free trade agreement and continue with the regular pace of 50 cars exported per day.
Conclusion
In conclusion, Toyota is able to capitalise on the situation with Brexit through careful planning and the multimodal approach to retrieving the lead on this market by exploring new options available to foreign companies. Sustaining its current performance over a time of great uncertainty is the key goal for Toyota’s UK division. Despite the projected drops in revenue, it is possible for the company to alleviate the impact of Brexit via internal and external changes to the company’s approach to organisational operations.
Kotter’s eight-step change management model reveals how the involvement of all parts of the company in its decision-making process can alleviate the impact of a sudden increase in expenditures linked with Brexit. Communication remains a key tool for Toyota in dealing with the strain from unfavourable policies and the shrunk market. A gradual transformation that will be aligned with the UK’s interests is the most productive way towards not only profitable but highly competitive European division for the company.
Reference List
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Humphreys, M. and Munro, D. (2019) Brexit and the car industry. New York, NY: Routledge.
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Kotter, J. P. (2012) Leading change. Boston, Mass.: Harvard Business School Press.
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