The requirement of understanding the business environment and external factors that influence the activities of an organization is profoundly observed in context of the strategic marketing initiatives. The evaluation of the case of Toyota Motor Corporation in the automobile industry would be presented in this report with notable references to the business environment and the external influences on the company’s business. Toyota Motor Corporation was founded in 1937 with the development of the first prototype of the Toyota AA passenger vehicle and since then the company has evolved over the course of 70 years to become one of the leading automobile manufacturers in the world (Berger, 2010). The business of Toyota is operated on a global scale with manufacturing units of the organization spanned across 6 different continents and workforce amounting to almost quarter million people. The automotive business of Toyota is accountable as major contributor to the total sales of the company i.e. 90% alongside its other activities such as sales finance.
The business environment of Toyota can be formidably characterized by references to the fluctuation of economic events which are reflective of prominent indications for organizations to shift their focus towards learning as a priority of their corporate agenda. The common factors that are noticed in the present business environment include formidable foreign competition, uneven distribution of economic regeneration, the prevalence of recession and structural unemployment (Chang, 2016). These factors have been attributed to the major influences that lead to the crisis experienced presently by developed economies in the context of mass production.
The prospects of growth and economic regeneration could be accomplished only through driving inclinations towards flexible specialization, especially in manufacturing as well as feasible reforms in the management of production and human resources. These measures are considered productive in terms of effective manufacturing and prospects for business overhaul as compared to the conventional mass-production techniques. It is imperative to observe that learning would be a prolific aspect that can help organizations to adapt their activities to the trends identified in the business environment (Laudon & Laudon, 2016). Organizations in the automobile industry are facing considerable setbacks for profitable operations on a global scale. Therefore a comprehensive evaluation of the external environment through the use of PESTEL analysis could facilitate credible insights into the opportunities and threats for the organization which could be reviewed for obtaining insights into the possible strategic direction of Toyota Motor Corporation in the future.
The emphasis on political factors has been largely promoted through globalization and it can be observed in estimating the feasibility of a country’s environment for conducting business on the basis of political stability. As per Shvetsov & Ponomarev (2015), the political factors are profoundly related to government policies and regulations that define levels of flexibility for international companies to do business in the concerned region (Shvetsov & Ponomarev, 2015).
Political stability reflects on consistency for business organizations in international environments since the lack of political stability is associated with the notable concerns of disruption in business as well as the distribution network and supply chain. Government policies are also accounted as profound influential factors on the profitability of a business in international markets (Welford, 2016). The example of Britain’s exit from the European Union has created political turmoil in Europe thereby leading to conflicts in the business environment for Toyota. On the other hand, the company was able to make viable progress in the Asian market with improvement in revenues and profits due to the relatively stable political environment.
Economic factors are considered as the prime indicators for suitability of market conditions. The recovery of the global market from recession has been marked with profound growth especially in the Asian region which is being focused on by majority of automobile manufacturers for swift growth and improvement of profits (Shvetsov & Ponomarev, 2015). However, similar conditions are not evident in other countries which are undergoing recovery from the economic slowdown.
It is imperative to observe that economic conditions are influential on the employment levels in a country and subsequently on the purchasing power of customers. Therefore higher purchasing power would imply the prospects for better sales and profits for organizations like Toyota. Improved economic activity also implies higher disposable income that can be used by customers for making premium purchases such as automobiles. However, the focus of Toyota for addressing the effect of economic forces could be identified in development of smaller cars that could be provided at lower prices (Laudon & Laudon, 2016).
The influence of culture and society’s perception of international brands is a prominent external factor for Toyota in its business environment. The implications of obstacles for international business due to cultural and social factors are profoundly observed in the smaller markets that make up the whole global market (Amin, 2014). Therefore, organizations are liable to face dilemma among standardization and localization out of which the latter provide feasible opportunities for organizations to establish prolific relationships with local consumers.
The influence of social trends such as increasing awareness for fossil fuel protection and the consumer preferences for electrical vehicles could also be identified in the automotive industry. Toyota has been able to cope with this trend by strategic approaches for introducing mass production of hybrid electric vehicles and launch of its hybrid vehicle ‘Prius’ (Chang, 2016). It is interesting to observe that Toyota has been able to accomplish global sale of almost 9 million units of the mass-produced hybrid passenger vehicle.
Technological advancements have been the core of major transformation in the global business environment. The large-scale use of IT systems for business growth and effective management is a common highlight in various industries. Since the automobile industry depicts profound association with technology it can be observed that the sales of an organization are dependent on the effectiveness of the technology utilized by the brand in its products. Some of the notable technological advantages that can be identified in products of automobile industry reflect on convenience of rider as well as safety (Shvetsov & Ponomarev, 2015).
Technological innovation has also been recognized as a notable influence on the consumer purchasing behaviour in case of automobiles. Other impacts of technological innovation could be identified in the improvement of fuel efficiency of vehicles alongside reduction of environmental impact (Bendell, 2017). The applications of technology can also be perceived in the case of social media and ICT systems for internal communications within the organization as well as engagement of customers with the brand.
The concerns for environmental awareness are profoundly observed in context of the automobile industry and companies with environment-friendly automobile designs are liable to have higher popularity and promising brand image. The preferences of customers for brands that are able to contribute to environment restoration and sustainability have been explicitly noted in the recent times in various industries. Environment friendly brands are also subject to higher popularity and promising brand image that are prominent determinants of the business performance of an organization. The support from government is also a notable support that is available for organizations with commitment to sustainability and those which are able to manage their environmental impact as compared to other organizations (Gerasimov & Gerasimov, 2014). Toyota also depicts formidable commitment to sustainability and includes strategic approaches in order to ensure utilization of resources without presenting detrimental consequences for future generations. Toyota has been able to illustrate profound efficiency in context of sustainability through its various initiatives among which the development of fuel cell vehicles and reduction of emissions which are reflective of its strong commitment to safeguarding the environment. The collaboration of Toyota with environmental agencies for preserving threatened species as well as the targets set by the organization for reduction of its vehicle CO2 emissions by 90% as compared to the estimates in 2010 by 2050.
The legal factors are mandatory obligations for organizations to conduct their business operations successfully in international markets. The common areas which shall be addressed by organizations with respect to this external environment factor include employment laws, legislation for equality and fair remuneration for work (Hammer, 2015). In the case of Toyota, it is essential to focus on the implications of environmental impact and passenger safety that can draw attention to legal implications. The measures initiated by Toyota such as education and training programs as well as internal training programs are prolific aspects for ensuring legal compliance across all levels of the organization.
The business environment in the automotive industry has undergone substantial changes in the recent time with profound directions towards two significant trends. As per Kolk (2016), the first trend could be identified in the exponential rates of increase in globalization that imply the motivation of companies to tap into global markets, improve market shares, address the needs of diverse market segments and leverage resources that are accessible in different countries. Therefore, with the increasing pace of globalization, firms are not new to internationalization in the context of global business (Kolk, 2016). Hence the presence of various powerful multinational firms in diverse cultural settings across distinct geographical jurisdictions in the world can be imperatively observed in the present times. Another notable trend that can be identified in the present business environment is the demand for social responsibility among business organizations especially in response to the observation of large-scale scandals and corporate frauds in the recent years.
According to Niewolny & Lillard (2016), the underlying influence of unethical behaviour, as well as illegal attitudes and actions committed by financial corporations in Europe and the United States, could be noted in the financial crisis of 2008. These negative consequences have invited prominent emphasis on corporate social responsibilities of organizations and multinational corporations are expected to set benchmarks of socially responsible behaviour in the conduct of their business operations across the world (Niewolny & Lillard, 2016).
The significance of corporate social responsibilities of multinational organizations can be identified in the development of higher levels of trust among people regarding business. In the case of the automobile industry, corporate social responsibilities are not limited to philanthropic activities or moderation of supply chain activities. On the contrary, CSR and sustainability commitments are increasingly becoming profound for organizations in the automobile industry owing to the change in customer preferences and implementation of legal regulations directed towards restrictions on usage of natural resources and permitted levels of carbon emissions.
Prior to the evaluation of the relevance of the theme of corporate social responsibility (CSR) and sustainability to the automobile industry and specifically for Toyota Motor Corporation, it is essential to focus on the imperatives related to the theme in literature. CSR is a common keyword in the corporate domain presently and various terminologies have been developed for appropriate description of the conceptual underpinnings of CSR (Rosemann & vom Brocke, 2015). Some of the key terminologies include corporate conscience, corporate citizenship, social or community performance as well as sustainable and responsible business which depict slight variances in their definition. The recent decades have pointed out that various researchers have recommended the inclusion of CSR in business models as a mandatory strategic approach. The core meaning of CSR is associated with the proactive employment of self-regulation in an organization so that activities conducted by the organization are aligned with the existing rules and regulations. Furthermore, CSR also implies the obligations of an organization to perform in accordance with or above par the legal requirements established for ethical and socially responsible behaviours. As per Sadgrove (2016), the interplay between CSR and sustainability could be anticipated from the commitment of CSR objectives towards responsible behaviour for the environment and stakeholders alongside the promotion of public interests and assuring sustainable development of an organization (Sadgrove, 2016).
The broadening of the scope of CSR could be identified in extending the consideration of stakeholders to include customers, competitors, community, society, environment, governmental agencies, employees and future generations apart from the investors and shareholders. The growth of an organization especially in the case of multinational corporations is responsible for increasing the impact of their actions on the stakeholders and society as well as the whole environment.
The benefits obtained from CSR initiatives of an organization are not limited to financial gains as assumed by the conventional assumptions regarding CSR philosophies but are extended towards the long-term profits for an organization especially for sustainability of the firm in the consistently increasing competitiveness in business environment. CSR and sustainability can be considered as relevant themes for Toyota considering the issues that affect the organization in terms of social, environmental and economic aspects.
In terms of social issues, the automobiles manufactured by Toyota were found to be malfunctioning and parts such as pedals, brakes, and accelerators. According to Vom Brocke, et al (2014), the Securities and Exchange Commission, the Los Angeles city attorney and the US attorney for the Southern District of New York had implemented an investigation into the Toyota Motor Corporation. Other bodies involved in the investigation were the Congress, media and federal regulators which were focused on the sudden problems encountered by the Toyota automobiles (Vom Brocke, et al., 2014).
Government officials are comprehensively emphatic on the company’s commitment to disclosure of safety problems and the compliance of the manufacturer to safety guidelines and security regulations. Various criticisms are also drawn towards the impact of these issues on the financial performance and on the sustainability of the organization. However, Toyota depicted conformity to Deming’s principles and recalled 878,000 units characterized by suspension faults on a national level for its selected automobile models. This was reflective of the socially responsible behaviour of Toyota that implies the relevance of corporate social responsibility and sustainability for the automobile manufacturer. As per vom Brocke, Zelt & Schmiedel (2016), the impact of such incidents caused probabilities of economic downfall thereby implying the need for the organization to address CSR commitments in its internal perspective i.e. for employees, shareholders and investors (vom Brocke, Zelt & Schmiedel, 2016).
The loss of economic performance created potential chances for voluntary layoffs, reduction in wages and bonus incentives for workers thereby implying the necessity of implementing CSR for its employees and their families. The environmental aspects of CSR are quite prominently observed in the automobile sector as it one of the notable sectors that contributes to global levels of greenhouse gas emissions especially in the utilization of its products for transportation. While the prototypes for environment-friendly fuel cell vehicles are being developed on a large scale, the primitive nature of the products and the increasing middle-class population invite the requirements for producing vehicles that run on fossil fuels such as petrol and diesel.
This causes a formal dilemma for the organizations in automobile sector as they have to address changing trends in customer preferences alongside the impact of their operations and products on the environment. furthermore, it is essential to observe that the impact of the automobile industries manufacturing and product usage operations on the environment could present long-term consequences on the environment that can lead to disruption of business of the organizations in various locations around the world which would imply prominent loss for stakeholders including employees, shareholders, consumers, the environment, society and the future generations. Hence the commitment of organizations such as Toyota to CSR and sustainability in the automobile industry is an imperative requirement for resolving the potential detriments that can be influential on the environment and subsequently on the future generations thereby affecting sustainability.
The explicit observation of the organization’s CSR philosophy could be accounted as a significant insight into the capabilities of the organization to respond to the requirements of social responsibility and sustainability. The primary ambition of Toyota is directed towards contribution to the society and the world through manufacturing. The company’s CSR philosophy was established and implemented in March 2009 which was clearly reflective of the nature of relationships of the organization with its stakeholders including business partners, customers, local and global communities, shareholders and employees. The CSR policy of Toyota is classified into nine distinct areas that are leveraged by the CSR committee for evaluation of the status of implementation of the policy and promotion of CSR activities (vom Brocke, Zelt & Schmiedel, 2016).
The basic philosophy of Toyota in implementation of the CSR policy could be ascertained in the form of five distinct aspects such as respect for the law, respect for employees, respect for others, respect for customers and respect for the natural environment. The respect for law implies the company’s determination to depict compliance with spirit of law in Japan as well as foreign jurisdiction alongside maintaining fairness and transparency in all dealings of the company. The respect for employees implies the commitment of Toyota to promote innovation and other competences of its workforce alongside its determination to create a favourable workplace environment characterized by co-operation that can help the company as well the workforce in realizing their complete potential. The respect for others in the case of Toyota is reflective of the organization’s commitment to people, traditions, and cultures of the specific locations in which it operates.
This aspect of the CSR philosophy of Toyota depicts visible indications of the CSR activities of Toyota in the external context as the organization works for promotion of economic prosperity and growth in the regions and countries where it operates. The respect of the organization for customers identified in the CSR philosophy could be identified explicitly in the organization’s investments in product research and long-term development activities that can improve the value propositions for customers.
The final and most significant element in the CSR philosophy of Toyota can be identified in its respect for the natural environment which implies prominent references to the leveraging of corporate activities for positive contributions to social prosperity and regional living conditions. The contributions of Toyota to the natural environment are also identified in its commitment for provision of products and services that can be characterized by high quality, compliance to higher safety standards and limited possibilities for waste generation.
The response of Toyota to its CSR commitment is explicitly dependent on the actual practices rather than vocal claims or marketing gimmicks which can be observed in the case of CSR claims made by many organizations. The organization relies on four precedents for compliance with CSR policy as Toyota emphasizes on realizing compliance through adherence to laws and regulations alongside conforming to social and ethical norms. Therefore Toyota relies on the prospects of strong leadership as depicted by the top management for promoting compliance across all its operations that comprise of consolidated subsidiaries of the organization in Japan as well as foreign locations. The company’s code of conduct as well as initiatives for increasing comprehensive awareness of employees through information and monitoring as well as ensuring conformity to compliance.
The organization has established the Compliance Subcommittee as a subordinate entity to the CSR committee and it is responsible for formulation of action policy and conducting follow-up checks on the advancement of the organization in CSR on a quarterly basis. The activities of the subcommittee include restructuring of the organization for ensuring compliance throughout the Toyota group. The second foundation followed by Toyota for ensuring compliance with its CSR policy is notably identified in the formulation of code of conduct and its dissemination to employees in an interpretable format (vom Brocke, Zelt & Schmiedel, 2016). The consolidated subsidiaries of Toyota are required to comply with the requirements of developing code of conduct individually in accordance to the corporate cultures and specific business lines. The next significant aspect in the realization of CSR commitment by the organization can be recognized in provision of comprehensive information to employees regarding the relevant laws and regulations which is realized through provision of compliance education and training to employees at various levels of the organizational structure.
The training process encompasses the provision of relevant legal knowledge to employees relevant to their job positions in the organization, training in risk management and ensuring their acquaintance with emergency procedures that have to be followed for educating employees regarding risk management. In the case of new recruits, the information is reflective of basic guidance with respect to legislation and corporate ethics by leveraging the Code of conduct as a resource for instruction. The effectiveness of providing training is realized through identification of distinct approaches for engagement of employees. The lectures for employees are characterized by group discussions, interactivity, and prospects for increased participation from employees at various levels in the organization that contributes to the comprehensive understanding of employees regarding CSR and ethical commitments. The company also takes prolific initiatives for surveying the needs of participants prior to the lectures so that the needs could be addressed effectively in the compliance training and education programs.
The initiatives of Toyota to ensure CSR commitment can also be identified in monitoring and confirming compliance which is accomplished through the execution of compliance self-assessment by various consolidated subsidiaries of the organization within as well as outside Japan. The subsidiaries are required to resolve a checklist comprising of references to variables reflecting on the applicable laws in order to determine whether the subsidiaries and the associated departments are compliant with the suggested CSR commitments. This assessment could lead to identification of potential implications towards coordination between the individual departments and concerned subsidiaries for making improvements. The compliance hotline of Toyota is also a productive indication towards provision of opportunities to employees as well as their families for obtaining advice regarding negative consequences in compliance related matters alongside development of adequate responses. The compliance hotline is illustrated in the code of conduct of the organization that is disseminated to employees in the consolidated subsidiaries for informing them regarding the service.
It is imperative to consider that Toyota has to experience multiple challenges with respect to CSR and sustainability owing to its operation in the automobile industry. The challenges are profoundly identified across the wide range of business operations ranging from product development to the disposal stage. The substantial growth in the size of the organization and market share in the global automobile industry is responsible for complicating the challenges encountered by the organization to comply with commitments to CSR and sustainability. The prominent influence of government, stakeholders, and society for depicting relevant socially responsible behaviour are reflective of peer pressure on Toyota. While the adherence of the organization to its CSR philosophy and initiatives for ensuring compliance are explicitly observed, the potential scope for improvement could be realized through ensuring that the organization focuses on short term and long term CSR and sustainability goals distinctly. The classification of product research and development as a long-term sustainability objective could be responsible for helping the organization to develop products that are appropriately suitable for the needs of future generations. Apart from the implementation of surveys in the internal contexts of the organization for determining the employee training needs for compliance education and training, Toyota should consider expanding the scope of market research in order to identify the variability of perception of the CSR and sustainability effectiveness of the organization in diverse cultural and geographic settings.
The short-term objectives for CSR and development should be prominently vested in employee training and skill improvement for complying with the drastic changes in the manufacturing operations in response to changes in product designs as well as monitoring efficiency in order to reduce instances of product recalls that would be helpful for addressing the CSR commitments in the internal context of the organization. The implementation of action plan and restructuring of the organizational framework could also be accounted as reasonable indications towards the effectiveness of the organization in addressing its CSR commitments.
However, the scope of improvement in these aspects could be explicitly addressed through references to the implementation of integrated information and communication systems that connect various consolidated subsidiaries of the organization thereby improving the prospects for monitoring of compliance and coordination of CSR activities of Toyota. Therefore, it can be concluded that the prolific avenues for improvement of CSR commitments and sustainability precedents are primarily vested in addressing social, economic and environmental issues which shall be consistently adopted by the organization in order to prevent any possible implications towards detriments for the organization’s stakeholders.
The evaluation of external environment of Toyota and the relevance of CSR and sustainability for the organization could be considered as profound contributors to the improvement of strategic effectiveness of the organization and identification of prospects for long-term business performance and growth in market share.
While the external environment analysis provides notable implications towards the significance of environmental and technical factors in the automobile industry, the evaluation of the relevance of CSR and sustainability to Toyota can be collated with the findings of external environment analysis to derive reasonable modifications in the strategic approaches for improvement of its social and community performance.
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