Executive Summary
Toyota Motor Manufacturing UK should focus on the United Arab Emirates as its next market. Following a macro-environment evaluation, the country has a stable environment, which is conducive to the company. The country has a stable government, a growing economy, and a well-developed infrastructure (Guéraiche, 2019). Furthermore, because of the low unemployment rate in the UAE, a large number of citizens can afford a Corolla Hybrid model. Therefore, a joint venture, exportation, and foreign direct investment are all options for the company to enter the country. However, in order to mitigate the potential risks associated with the entry strategies, the company may want to consider increasing its research and putting more emphasis on the quality of its products.
Introduction
Toyota motor manufacturing in the UK is one of the best-performing Toyota manufacturing plants. The level of UK production has made Toyota a major player in the country’s manufacturing industry, with most of its output being shipped overseas. The company was incorporated in 1989 to consolidate Toyota’s market base (Toyota Motor Manufacturing UK, 2022). It is located in Derby and is part of the motor vehicle manufacturing industry. The company employs more than 2,725 employees and generates about $3 billion in sales. One of the company’s core products is Corolla Hybrid because it offers outstanding value to the customers in the market (Germain Toyota of Columbus, 2022). As a result, the rationale for going into the United Arab Emirates (UAE) is to gain a competitive advantage in the motor vehicle manufacturing industry.
Analysis and Discussion
The Core Product of the Company
Corolla Hybrid is the core product of Toyota motor manufacturing based in the UK. It is among the first model of Toyota Corolla’s new version. The model integrates an award-winning compact sedan’s proven formula with a hybrid powertrain (Germain Toyota of Columbus, 2022). This gives it the ability to deliver remarkable efficiency in the market. In addition, the vehicle comes with features of a contemporary vehicle, such as a smart key system and Toyota safety sense. With these features, the vehicle will attract more buyers.
PESTEL Analysis Model
PESTEL analysis model plays an integral role in analyzing the external environment of a business. The model has advantages and disadvantages that should be considered when analyzing a macro environment (Madsen and Grønseth, 2022). This one helps organizations figure out and look at the main factors that lead to change in a strategic business environment. The tool also helps them respond to changes in the environment more effectively and efficiently. On the other hand, the model does not provide essential information, such as the degree of competition in the environment. Despite the challenges, the PESTEL model is important in understanding the macro environment of an organization.
Political Factors
The UAE is a constitutional federation and among the most stable governments in the Middle East. It comprises of Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain (Guéraiche, 2019). Each of these emirates is ruled by a leader, whereas the Federal Supreme Council, the UAE’s supreme constitutional body, comprises all seven leaders. Abu Dhabi is the UAE’s capital and operational hub for most government operations. The UAE is a significant player in the Middle East and holds considerable influence on a global scale (Guéraiche, 2019). It maintains strong diplomatic and commercial ties with the US, Saudi Arabia, India, China, and other nations across the globe. Based on this, Toyota motor manufacturing UK can effectively operate in this environment.
Economic Factors
The economic environment is a critical aspect of the analysis of the UAE. The country is part of economic and political groups. First of all, it is the world’s 29th-largest economy. Its GDP is expected to be more than $400 billion in 2022. (Hammour and Mckeown, 2022). Petroleum, gold, and diamonds are some of the main things the UAE sells outside of the country. India, Japan, China, Oman, and Switzerland are the top places to send your products. Most of its imports on major products, such as automobiles, come from China, India, Germany, the UK, and Turkey. This means that Toyota manufacturing UK can easily get market for its Corolla Hybrid. The company is likely to benefit from the country’s economic performance.
The UAE is one of the wealthiest countries in the world in terms of per capita income. Over the years, it has made considerable economic progress from its abundant natural resources, economic diversification, innovation, and foreign direct investment inflows (Facchini, Jaeck, and Bouhaddioui, 2021). In addition, it has developed a diverse range of industries, such as tourism and real estate development, that assist it in maintaining its position as one of the world’s wealthiest countries. However, the company’s excessive reliance on the petroleum sector is a flaw. This indicates that the country’s economy might decline if petroleum is diminished. Therefore, although its reliance on petroleum is dangerous, the UAE’s economy is stable and provides a conducive environment for foreign companies to operate effectively.
Social Factors
The United Arab Emirates is one of the most liberal countries in the region. Dubai, in particular, is a thriving international business hub and a very dynamic emirate (Schilirò, 2021). It is technologically advanced and well-connected to the rest of the world. The UAE’s population is estimated to be around nine million people. Emirati nationals account for roughly 20% of the total population, making the country one of the most immigrant-heavy in the world (Abaido, 2020, p.350). As a result, the UAE is home to people from different cultures and countries, making it one of the world’s most cosmopolitan cities. The leaders of the company are assured of a conducive environment to conduct their research and operate.
The Emirati society is characterized by luxurious lifestyles, in which the possession of lavish goods reflects an individual’s personality, social image, and social position. Family members and peers influence personal purchase decisions. The number of Emiratis pursuing higher education continues to grow (Ashour, 2020). Expatriate workers are a significant factor in the UAE’s national identity and social demographics. For example, foreign workers account for a sizable portion of the UAE’s national workforce, resulting in disproportionate population demographics. The country attracts people from all over the world, which makes it a business hub. More vehicles will be required to take people to their destinations. As a result, labor markets will almost certainly face new regulations to reclaim national identity.
Technological Factors
Technological factors play an integral role in running businesses in the UAE. The UAE’s people are tech-savvy, allowing companies to leverage technology (Aminova, Mareef, and Machado, 2020). This indicates that an organization can use technological operations, especially when marketing its products. For example, most Emiratis use social media, making it easy for an organization to reach them. In addition, the government has invested heavily in ICT, which provides a good platform for contemporary organizations. Organizations can access internet services and use available infrastructure to support their operations. Therefore, the UAE’s technological environment is effective because it supports the activities of modern businesses.
The United Arab Emirates invests in cutting-edge technology, which leads to new technology-based ideas. The country is at the top of global rankings for networked readiness and internet use, with well-connected schools in all areas (Dutta and Lanvin, 2019). This has helped build a more technical workforce that can help the economy grow in many different ways. The UAE’s information and communication technology (ICT) market are competitive. The government has taken a number of initiatives to foster the growth of a knowledge-based economy. For example, Toyota motor manufacturing will use the existing ICT infrastructure to effectively run its operations, especially in the area of marketing. As a result, the country is a major importer of new technological equipment to transform its operations and adopts innovations.
Environmental Factors
The UAE is the most visited country due to its infrastructural development. However, with this massive development comes environmental issues. The country is experiencing the impact of rapid development and the effects of climate change and globalization. The UAE’s rapid economic growth has led to serious environmental problems (Gill, Viswanathan, and Hassan, 2018). These problems arise from the high rate of population growth, the need for more energy, and the rapid development of cities, which releases a lot of greenhouse gases and other pollutants into the air (Al-mulali and Che Sab, 2018). For example, when many visit the country, they are more likely to hire vehicles to take them to the hotel and different areas, which pollutes the environment. Therefore, the country’s economic development contributes to climate change.
However, the protection of the environment is among the topics that get the attention of the UAE government. As a result, the government is introducing measures to reduce its impact on the environment. For example, the emirate’s government stated that Dubai intends to lower its carbon footprint by 30% in eight years (The New Arab Staff & Agencies, 2022). As a major regional, business, and logistic hub, Dubai contributes a greater percentage of the country’s overall carbon footprint. In addition, the net-zero goal of 2050 made by the UAE government is part of the Paris Agreement, which asks countries to come up with long-term plans to cut greenhouse gas emissions. Thus, the UAE government has a roadmap to reduce its carbon footprint.
Legal Factors
The legal environment is one of the factors used to analyze the UAE. The country is a federal constitutional monarchy led by a king who is head of the country (Zhao, Naidu, and Wallis, 2019). It has a labor law that applies to all staff and employees, no matter where they come from. The maximum amount of time an adult can work is eight hours a day. However, it can be a little different based on the type of business. In addition, people who live in the UAU are very safe because there are not many crimes in the country. It shows that rules and regulations in the country are very strict. Therefore, the legal framework of the UAE provides a conducive environment for the operations of businesses.
The Analysis of The PESTEL Model In UAE
The company should enter the United Arab Emirates (UAE) to widen its market base. The UK has been one of the major markets for the company. Following Brexit, the company is likely to experience a number of challenges, such as labor shortages, economic impacts, and many more. To counter this impact, the company should consider entering the UAE. This country is becoming a major investment hub for most companies across the globe (Aminova, Mareef, and Machado, 2020). One of the reasons is its growing economy over the years. It has a bright future and presents a lot of opportunities for organizations. In addition, the country’s government has heavily invested in economic growth to boost its performance. As a result, the country can be a good market for the company when considering outside Europe.
Porter’s Five Forces
Porter’s five forces model is among the best tools used to understand the external environment. One of its benefits is analyzing the competitiveness of an industry in an organization (Kay, 2019). In addition, it shows the degree of rivalry in a sector to allow an organization to make an informed decision. The other aspect is determining the influence of major stakeholders on an organization, such as buyers and suppliers (Kingsnorth, 2019). However, the tool ignores the influence of government in an environment.
Table 1: Porter’s Five Forces
Other Factors to Consider When Analyzing UAE
Demand and Supply of Labor
Labor is one of the crucial factors required for effective operations of an organization. Without labor, it is impossible to run business operations and achieve the set goals. In the UAE, non-nationals constitute most of the workforce in most jobs because of demographic imbalances. Most of the time, the private sector in this country determines the workforce number. The federal and local governments hire about 19% of the overall labor force (Hijazi, Saeed, and Alfaki, 2019). This leaves about 80% of the country’s private sector’s labor market. As a rule, most of the government jobs in the UAE have been held by its citizens. Based on this, most private organizations have been run by employees from other countries across the globe (Hijazi, Saeed, and Alfaki, 2019). As a result, the labor market growth in this country has reduced, reducing the number of jobs.
The Availability of Infrastructure
UAE government has invested heavily in building modern infrastructure. As a result, the country is surrounded by beautiful buildings, roads, airports, and many more. UAE has the best road network that promotes smooth movement from one destination to another through the road. A global competitiveness report issued by World Economic Forum indicates that UAE is in the seventh position globally in terms of road quality (United Arab Emirates, 2022). In addition, the country is home to beautiful hotels and buildings. For example, Jumeirah Al Naseem is a UAE hotel that provides excellent services. With this infrastructure and facilities, international businesses can find a conducive environment to perform their operations.
The Appropriate Strategies for Entry into UAE
Exporting
Exporting is when an organization sells products to customers in a different country right from their business. It is one of the most common ways to get into a new country and the least risky (Samiee and Chirapanda, 2019). It may also be cheaper because an organization does not need production facilities in the chosen country. For example, Corolla Hybrid will still be manufactured in the home country and taken to UAE for sale. In the near future, however, transportation costs are likely to rise, which will raise the cost of exporting. Most of the costs of exporting come from marketing costs. An organization needs to work with a transportation company, warehouse, and the UAE government most of the time.
Foreign Direct Investment (FDI)
Foreign direct investment is a strategy that the company can use to enter into UAE. It is a type of cross-border investment where an investor from one country has a long-term interest and a lot of power over a business from another (Konara and Wei, 2019). FDI can be done by creating a new venture or acquiring an existing company in the UAE. For example, the company can choose to set up a new business. The main advantage of this strategy is that it gives the company the ability to control its operations directly. It also increases a company’s income because they do not have a share of other companies. However, this requires a lot of capital to cater for costs such as premises, human resources, infrastructure, and other areas (Konara and Wei, 2019). Therefore, despite the challenge of cost, FDI can benefit the company.
Joint Venture
A joint venture is one of the strategies that the organization can use to enter into UAE. It is a business arrangement where two or more parties agree to pool their resources to achieve a specific objective (Nippa and Reuer, 2019). After the agreement, the parties involved form a jointly-owned business. In this arrangement, one of the parties must be a local business. For example, the company can work with Al-Futtaim Motors, a firm selling used Toyota vehicles in UAE. The parties create a management team and share the control of the new business. With this strategy, the company uses local knowledge and shares costs. However, there are some problems, such as figuring out who should invest what and how to split the profits can be hard. Although the strategy has some disadvantages, the benefits are more.
Risk Minimization Strategies
Table: Risks
Recommendations
Drawing from the macro-environment, the organization should consider the following aspects. First, even as it enters the UAE, a team should be established to handle the transition to avoid mistakes that can seriously affect the company. The team should have a good understanding of the UAE to work effectively. Secondly, the company should first enter the country through exporting to understand the market. Then, with the right information about the market, they can go ahead with either FDI or a joint venture. However, with FDI, the company should set aside more funds to effectively run its operations in the UAE. For instance, due to a the country’s labor shortage, the country can consider hiring the best employees from other countries across the globe. With a joint venture, the company should be careful when choosing a partner to work with. The company should conduct an extensive background check to determine whether they can be trusted or not.
Conclusion
UAE is the best market for Toyota motor manufacturing UK’s Corolla Hybrid. The country has an effective environment that can support the company’s operations. For example, the country has a stable government, a growing economy, a good infrastructure, and many more. In addition, with a low unemployment rate, many UAE citizens can afford a Corolla Hybrid model. The company can enter the country through a joint venture, exportation, and foreign direct investment. However, to mitigate the possible risks experienced through the entry strategies, the company should consider increasing its research and focusing on the quality of products. Extensive research enables leaders to make the appropriate decisions. In the long run, this will have a positive impact on an organization.
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