Organizations in today’s scenario need to plan proper business strategies and plans in order to respond to environment of overall business. This environment is prone to be affected by global environmental factors including technological and economic elements. There can be certain areas where organizations can analyse environmental factors and therefore identify suitable business plans for the company (Logsdon and Wood, 2002). The present report is based on understanding strategic responses of Toyota Company and identifies key strategies and plans that company has been proposing to face environmental factors in market. Further this report also identifies the impacts of globalisation on business of Toyota and identifies its benefits and opportunities. Final part of this study deals in developing a clear understanding of importance of Corporate Social Responsibility (CSR) that is a part of the ethical environment for its business. It also identifies legal and regulatory compilations related to CSR activities of Toyota.
Toyota is an automobile company with its headquarters located in Japan. It has been termed as the world’s 14th largest company in terms of revenue. In the recent years it has also been named among largest producers of automobiles in industry. In order to analyse international business environment of this company there can be several tools used like PESTLE, Porter’s five forces, Porter’s diamond etc. This part of report carries out international environment audit using Porter’s Diamond model (Jin and Moon, 2006).
Porter’s Diamond model is related with firm’s competitive advantage on international perspective. There are certain factors that can thus affect competitive environment of company. These can be performance of firm in conjunction with that of the company. Another factor says that company needs to be involved in constant innovation of its products. The changing environmental conditions of country are most important factors that are likely to affect firm’s performance and its innovation and practices. Understanding different factors existing in this model:
Factor conditions: These involve all factors of production like labour, land, natural resources, capital and infrastructure (Peng, 2013). If these factors are taken on cost basis then they can be available from domestic sources but to consider efficiency and more competitiveness, international market can be sourced for the same.
Demand conditions: These conditions arise from demand in the national and international market (Sardy and Fetscherin, 2009). Rapid increase of demand in the domestic market leads to better technologies that can be adopted. Increase in international market growth can be advantageous for better opportunities of growth and export.
Related and supporting industries: This includes companies that are involved and coordinate in activities of value chain of Toyota. Success of this company is sure to affect these related industries too, in a positive manner. Further due to improvement in production of these companies internationally, exports and imports also increase that benefit the industries that support in cargo and carriage services etc.
Firm structure and rivalry: Under this the creation, management and operations of firm are considered. Toyota has been a Japanese company and is likely to get affected by domestic car manufacturers. Further it has a greater scope in international market by developing itself to competitive globally (Lamberg and et. al., 2007).
Analysing the Micro environment for Toyota there are several elements that can be considered in this case. These are:
Stakeholders: Considering the stakeholders, Toyota treats all its customers as a first priority. It also has better developed relationships with all employees and business partners. Toyota has been involved itself in fulfilling its social responsibility by applying effective preservation methods for environment. Company has to satisfy all its stakeholders and make better relations with them to grow the business and develop new opportunities.
Suppliers: Toyota has a larger network of suppliers that are responsible to provide it with numerous parts of automobile (London and Hart, 2010). It concentrates mainly on developing key components like engine and technology for design and manufacturing. These suppliers include Yokohama for tyres and Denso for auto parts. There are several more suppliers related with company.
Customers: The customers of Toyota group contain people from medium earning group that rely on quality service and effective design. It is therefore required to provide better service and design etc. to keep its customer’s satisfied. It is essential for Toyota to have varied designs and products to satisfy every group of customers by providing them the required product (Barnea and Rubin, 2010).
Competitors: Toyota is the market leader and has been dominating market by almost 50% of the market share. Its competitors are Nissan and Honda. Apart from Toyota that is largest automobile producer, Nissan is third largest automobile company in industry (Lundby and Jolton, 2010).
Macro environmental analysis for Toyota can be done by using PESTLE analysis as a tool. These are:
Political: Britain and few countries have agreement with European Union on free trade that defines no tax on countries to import cars from other nations. Still there are custom duties that act as barrier to imports.
Economical: Considering economical condition of the UK automobile industry, it has been favourable for manufacturing and other business for Toyota and thus has a significant benefit under it. The profitability of company can be improved by focussing on international market and developing new and innovative products (Tan, 2012).
Social: To focus on society, the company has been dealing with its efforts to provide safety through its vehicles thereby ensuring that people desire more to own new cars for personal use that may be safe for them.
Technological: As automobile industry is facing intense competition, Toyota needs to continuously involve in research and development of new technology and bring innovation in its operations (Henson, 2005).
Legal: These are factors like laws and regulations that company has to keep pace with and comply with them in order to work under the legal framework provided by government. There are certain legalfactors affecting Toyota involving trading in different countries that impose taxes (Cavusgil, Knight and Riesenberger, 2008).
Environmental: Toyota has been working upon its duty towards the environment and has been contributing in providing safer environment by improving its technology to lower the emission causing pollution.
There are certain points that can be considered while understanding impact of international business environment and its factors upon operations of Toyota. The most important strategy that a company might adopt to go internationally is foreign market entry strategy that brings different impacts on Toyota (Turner, 2012). The most important aspect is competition that involves several companies that are operating in same industry and apply different tactics to become competitive. Some companies like Nissan and Honda are competitors of Toyota that may adopt lower price as a strategy to sustain their position in market. Globalisation is another factor that is likely to affect Toyota in terms of policies, regulations and market forces that occur due to new market entrants. The companies face competition in domestic market as well as foreign market due to increase effects of globalisation. Further marketing is a factor that requires Toyota to market itself all over world and apply appropriate strategies to sustain in international market and thus build up customers’ world- wide (Verbeke, 2013). Toyota has to understand the international business environment and should plan the strategies accordingly to move in any new market and grab new opportunities for their business. Before entering in new market for expansion, the company has to deeply understand the varied culture of businesses and face competition.
Globalisation and its introduction in world business have been given rise to competition in the whole world and business economy. The different companies and industries have been trying hard to run under competitive business environment and have shifted their focus on operating internationally rather just covering domestic market. It has been argued that globalisation is responsible to bring economic revolution, competition and deregulation in the market. There are certain factors that act as extent of globalisation like:
Labour: Due to globalisation, it has become comparatively easier to get labour easily as moving outside domestic country also provides newer employment opportunities for the foreign countries (Harkins and et. al., 2005). Toyota has its units outside Japan also that has been providing employment opportunities to thousands of people.
Trade: This is another factor that is involved as extent of globalisation on Toyota. The company is able to trade with different countries and making profits by producing for higher demands of products. Toyota has to analyze the desired needs of product in international market and then extend their production to have higher profits.
Cultural changes: The different culture of different countries is an extent of globalisation that needs to be reached by Toyota. It needs to focus on different cultures and factors like design, technology and cost of their cars to suit cultures of different countries (Henson, 2005).
Technical development: Due to increased globalisation, companies like Toyota needs to fulfil expectation of increased demands of innovation in technology to sustain itself in the globally competitive environment. They have to adopt new and innovative technology to bring change in the business and face challenges of globalisation. If company brings innovative cars which are desired and greatly satisfies expectations of consumers then they can also expand their business and earn profit maximisation.
Capital: It is another important element of any business and by going global; opportunities for investments are raised for Toyota due to its presence in international market.
There are several benefits of Globalisation that are useful for Toyota. These include:
The increased globalisation is beneficial to provide various countries to participate in trade activities internationally. This has been profitable for companies to provide better chances to Toyota to introduce its business in developed as well as developing countries that are more profitable in terms of earning revenues (Mrak, 2000).
Globalisation has a major challenge that it integrates different countries in trade that includes developed and developing countries both. Trading with developed nations is beneficial for Toyota for better margins of profit while smaller countries are getting higher benefits in trading with the company and thus are a challenge for Toyota.
The increased impact of globalisation has given rise to industrialization that is again a cause of degradation of environment causing pollution and impacting the whole world with global warming.
Accepting itself to cultural values and environment of particular countries is very difficult for Toyota. It may require customizing and changing its car’s specifications (Cavanagh, 2004).
Also there arise situations where workforce from a particular country is not skilled enough and the company might adopt to outsource people for its manufacturing and operations.
The companies operating internationally have to follow different organizational structures. Sometimes this structure is based on divisions that involve company’s some operation in one country and other in another country. The companies like Toyota that are larger and require showing their presence in foreign markets based on geographical structures. The companies can decide their structure on basis of easy availability of raw materials in different countries (Markgraf, 2014). They need to understand that business is running internationally and thus develop departments for its business. It also needs to define efficient mechanism for supply chain management that is helpful in establishing strong chain of supply from manufacturers to wholesalers, dealers, retailers, distributors etc. This must be strong that ensures Toyota’s reach to different parts of the world. Further organizational structure can also be based on selecting places from where labour or technology can be outsourced. This provides better efficiency to business. The structure of Toyota must be such that facilitates the company in communicating in a comfortable manner internationally and expand its business in global environment.
The international operations of a business can be evaluated in terms of its business activities that it performs in business. Understanding the international operations of Toyota, it is evident from various sources that company has its business worldwide and has around 52 manufacturing units operating worldwide. It involves in business and selling its cars in more than 160 countries. This is evidence that provides structural stability of Toyota in international market. These operations explain conduct and behaviour of company in global context. It can be argued that Toyota stands among the top companies in world in terms of revenues because of organizational structure (Tang, 2010). A counter argument to this could be that company has many strong competitors but still it has been operating successfully and serving large number of countries in world. For companies to operate globally, they require to invest better resources in marketing planning and branding its products. This has been proved by the brand awareness and high sales volume of Toyota worldwide, that it has better brand image and effective marketing that has helped it to establish itself internationally. In order to function in international environment, it is also necessary to provide better mechanisms for security and always involve in ethical trade practices that are important to sustain itself in the global market.
There are several moral and ethical questions that organizations like Toyota face while operating internationally (Barnea and Rubin, 2010). The moral issues are defined as certain duties that a business is expected to perform as a part of its business. There are problems that arise due to the purpose and operations of business internationally that are reason for Toyota to include its morals and values into its mission statements.
Organizational purpose: In order to fulfil its moral duty, company needs to include all its moral values and beliefs in its mission statements. The company’s strategies must not only perceive its focus on market share, profitability and growth but also on benefiting society and providing value to its customers (Saez, 2014).
Social responsibility: It is moral duty of each and every individual to safeguard environment and so companies must also involve in preserving the environment and take it as their moral duty. The term Corporate Social Responsibility (CSR) is used for the same purpose and defines its importance for company to be acceptable in global business (Cavanagh, 2004). It is necessary for companies to adopt different CSR activities in its business and make the business attained competencies from other players.
Apart from this there are several ethical values and beliefs that company needs to follow in its operations. These ethical issues come under activities that may or may not be legal and are sure to affect the society and other stakeholders related with company. These ethical problems are:
Legal compliance: The Company must involve itself in following all laws and regulations defined for industry and thus involve in ethical practices for hiring individuals, trading among countries etc. They have to maintain the risk management system in business to monitor and evaluate various problems which are been faced by business.
Deontological and utilitarianism: These are theories that provide an ethical framework for the companies to operate internationally. According to Utilitarianism, any action is not right or wrong. All depends on implications that action has (Poon and Hoxley, 2010). The implications can be pleasure, happiness, knowledge or satisfaction levels that define moral act to be good or bad. Deontological ethics is another theory that defines rightness or wrongness of an activity is its moral features like illegal terms, breaking promises etc.
While framing the corporate and business strategies, there are certain ethical and moral values that are required to be considered for successful operations of the company (Storehouse, and et. al., 2001). There are possibilities of certain conflicts that may arise due to this that are required to be identified. These are:
Environmental impacts: Toyota needs to consider the environmental implications of its operations and thus focus on them while formulating its strategies. It helps business by following various environmental laws like that for pollution, emissions and safeguarding the environment to run the business successfully.
Social responsibility: Toyota also needs to have a constant focus on fulfilling its social responsibility and therefore include it as a necessary value in its business statements. The company must also involve its values and plans related to its operations on global business or domestic only.
Peak oil: This is another conflict that arises in Toyota and other company’s business and thus has well established mechanisms for dealing with situations like hike in prices of fuels and raw materials that can affect the complete economic status (Kapelus, 2002).
Technological changes: This is also one of the most important factors that are required to be considered as changes in technology in industry demands innovations in products that may bring conflicts in operations, strategies and processes of company (Verbeke, 2013). It is the current demand of service users that they need improvement in technology to experience something different. Therefore, company should bring changes like modification in technology and better quality service etc. to make customers satisfied and use their products instead of competitors. Bringing such innovative change in business, Toyota can increase its business and make high profits (Cavusgil, knight and Riesenberger, 2008).
Relationships with government: Company has to focus on such issue and try to maintain good relations with government by following all their rules and guidelines (Lamberg and et. al., 2007). Toyota need to make positive and healthy relation at the time of entering new market in order to expand the business and pay all duties and taxes so to not have any conflicts.
There are several regulations and legislations that govern the operations of Toyota. In UK laws for corporate social responsibility, it needs to specify legal obligations towards its stakeholders that serve as its social responsibility towards them. The company law of UK has been providing procedures and mechanisms that define its values and duties that bind it legally to be a part of corporate social responsibility. There have been global agreements on basis of carbon emission that is an important concern. The emission is very harmful for the environment and has been a cause of global warming (Kapelus, 2002). There are more legislation on controlling pollution and keeping a check on companies operations and their waste disposal mechanisms. There have been codes of practices that are defined for companies like Toyota on its international operations. These are linked with Organization for Economic Cooperation and development (OECD) that involves such companies to contribute to national and international economy. Further the company also needs to be ethical and well organized under reporting mechanisms set defining the standards for auditing.
There are several strategies and processes that a company adopts to operate in international market with varying culture and geographical situations. It is therefore important for companies to comply with all laws and legislations related to global business and define own set of values to fulfil its corporate social responsibility. The undertaken report is based on understanding factors affecting international environment of Toyota that has been successfully operating. The global business of the company has been affected by many economic and technological factors. Further this study also includes defining impact of globalisation and its benefits and opportunities that bring employment for people and more revenues to operate internationally. Final part defines its ethical values that involve its duty to define policies for safeguarding environment from pollution.
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