environmental analysis of toyota company

Detailed PESTEL Analysis of Toyota

Toyota experiences the effects of social or sociocultural factors. EdrawMax’s PESTEL Analysis will provide a framework for investigating the external environment for Toyota's Global business.

If the question that is bothering you is what is PESTEL (analysis), one should look for the answer among the concepts of marketing principles. PESTEL analysis is a marketing tool that many companies use to evaluate the environment where the firms carry out their business operations. Management uses a PESTEL when the company launches a new product, project, or other service to gauge the future of the endeavor. PESTEL is the short form for the Political, Economic, Technological, Environmental, and Legal factors. Your understanding of the PESTEL analysis requires your knowledge about PESTEL analysis used to evaluate the market for a trade or an organizational unit.

Toyota is a multinational company of automotive manufacturing with its roots in Japan. Toyota is one of the top automobile manufacturing companies. Each year they manufacture almost 10 million vehicles. It is also the largest vehicle seller after Volkswagen. This article here carries out a detailed PESTEL analysis of Toyota and understands the company's macro-environmental factors that influence the business functioning of the company.

2. About Toyota

2.1 introduction of toyota.

Toyota is a Japanese multinational company established in 1937 by Kiichiro Toyoda. It is an automotive manufacturer headquartered in Toyota city, Aichi, Japan. They were originally founded as an exploding car manufacturing organization. It is currently one of the leading automobile manufacturers in the world.

It produces around 10 million vehicles each year. Moreover, it is considered one of the most successful ventures. It is a global brand that operates in over 170 countries worldwide. A PESTEL analysis of the automobile business operations will tell you about the suitable environment required to build a successful business such as Toyota. By studying the brand through the PESTEL analysis of Toyota , we will get to know the aspects of the company's working environment that have contributed to its massive success.

2.2 Overview of Toyota

3. toyota pestel analysis.

A Toyota PESTEL Analysis will evaluate the impact of the various external factors on the company's performance. Here is a detailed PESTEL analysis of the brand that will let us know about the forces and their advantages and disadvantages of them over its operations. The PESTEL factors that one should consider while executing the PESTEL analysis of Toyota are elaborated below:

Political Factors:

The political factors are vital to continue functioning for a multinational company like Toyota. Recently several companies have had to depend on political factors for their growth and development, thanks to globalization. The significant political factors in the case of Toyota are,

• A global company : Toyota is a company that has its manufacturing units across 28 countries and sells its produced vehicles in over 170 countries across the globe. For the company to keep functioning, the political status of these countries is a very vital aspect.
• Political stability : The political stability of a specific location decides whether the environment is positive or negative for the business. The government and its policies decide the future of international countries. Political stability is equivalent to a favorable environment for a business to run and thrive.
• Free trade agreements : The trade agreements with the local and state government allow a company to operate in a specific location. Free trade agreements are profitable to the business and will further enhance brand growth.
• Eco-friendly products : Another opportunity lies in producing and promoting eco-friendly products. It is possible with government support. The macro-environment of the units across the countries depends on the respective governments. For instance, Japan never had a good political relationship with China. Thus, Toyota could not flourish in this country. Due to the political turmoil in Europe in the recent past, the business was affected a great deal. In most parts of Asia, the political environment was much more stable and thus helped Toyota to gain a better position.

Economic Factors:

It is well-known that the better the economy, the better the chance of a business. Better the financial situation of the world market, the better it is for the growth of global companies like Toyota. The economy is a significant factor among other PESTEL factors. The market conditions are dependent on these economic factors. Factors like the GDP, per capita income, inflation, and purchasing power of an economy are directly proportional to a company's performance. The economic factors that influence the macro-environment of the brand:

• Competitors : The automobile industry has been seeing stark competition in recent years. The strong competitors of Toyota are companies like Tesla, Ford, and BMW. Also, on the flip side, the weakening of the Yen compared to the US dollar can give a better opportunity to gain in the US market.
• Growing economies : Developing countries are rapidly growing. Thus, creating an opportunity for a potential market for automotive manufacturers. The growth of the US economy means there is a massive opportunity for the manufacture and sale of vehicles.
• The recession caused by the pandemic : Though the pandemic has hit below the belt, adversely affecting the demand, supply, and overall global market, the market is seeing a steep rise post-pandemic. The world economy is growing at a fast rate compared to the pre-pandemic situation. It is a favorable environment for a company like Toyota to sustain and grow.

Socio-cultural factors:

Toyota is a multinational brand. Thus experiences the impacts of sociocultural factors on different communities belonging to varied geographical locations. This dimension of the PESTEL analysis of Toyota refers to the social trends that influence the business. In the case of Toyota, the primary external social factors are:

• Vehicles recalling : Toyota had to recall vehicles due to faulty fuel pumps. They had to recall a staggering number of automobiles that counted to over 700,000. It not only hugely cost the company but also damaged its reputation. They resolved the problem, but the mark remained.
• The demand for electric vehicles : The market is changing rapidly, and customers are more preferring eco-friendly cars to existing ones. Electric and hybrid vehicles are much more in demand right now. It is an opportunity for a vehicle manufacturing company to produce more environmentally friendly cars to attract the current market.
• Faulty Safety issues : Safety features are an essential element that a customer looks into a car. Toyota vehicles were declared unsafe due to faulty acceleration and pedal systems. Toyota had to face the outrage of many customers and thus lost their trust. It cost the company billions of dollars.
• Economical Indian market : Due to the cultural aspects, the Indian market prefers economic yet bigger cars. The market was a perfect fit for automobiles, like Innova, which was an instant success.

Technological factors:

The company spends millions of dollars annually to encourage research and development in the automotive sector. The result is that the brand has some technological advancements on its hat.

• Innovative Hydrogen cars : It is essential to sustain the business in the competitive market. Toyota was the first to introduce hydrogen cars in the market with its research and development motive. Hydrogen and electric cars are the future of the automobile sector. Toyota moved a step forward compared to its competitors by launching hydrogen cars.
• Going by the technological trends : Toyota follows the rule of continuous progress. It has always accepted the latest trends in automobile technology which has aided the brand to stay on the top list of the global market.

Environmental factors:

Some environmental factors impact a company's growth. PESTEL analysis of Toyota shows that these environmental factors have a pivotal role to play in shaping the future of a vehicle manufacturing company.

• Lower carbon footprints : Toyota understands that a car manufacturer affects the environment. The most challenging environmental issue right now is lowering the carbon footprint. The company has introduced hydrogen, electric, and hybrid cars to fight the number of carbon emissions. It also believes in a recycle-based sustainable society and thus optimizes its operations accordingly.
• Legal Factors : Legal compliances assure the smooth functioning of an organization. Laws such as labor, quality-related, and other business laws vary across nations and markets when followed correctly to ensure a positive effect on the company's growth. However, sometimes, some legal issues may cause a disturbance in the macro-environment of the business.

Legal factors:

• Recall settlement : When Toyota recalled its vehicles with faulty mechanisms, some outraged customers filed a case against the company. It resulted in heavily costing the brand. The brand settled the case for 1.2 billion dollars with the cost of fixing the faults.
• Lawsuits : In another instance, an Indian company filed a lawsuit against the manufacturing giant. The Indian company named Prius was fighting for its trademark.

4. How to Do a PESTEL Analysis in EdrawMax

• Step - 1: Preparation

If you are using the offline version of EdrawMax, open the tool in your system. If you wish to access remote files, head to https://www.edrawmax.com/online/ and log in using your registered email address. If this is your first time using the tool, you can register with your personal or professional email address. Go to ' Marketing ' diagrams under Business diagram type and click on ' PEST Analysis .'

• Step - 2: Template Selection

EdrawMax has thousands of free templates. Head to the Template section on the left and type ' PESTEL Analysis ' to see all the pre-built PESTEL Analysis templates like Netflix PESTEL Analysis, Amazon PESTEL Analysis, IKEA PESTEL Analysis, and more. Check the template that resonates closely with your business model. Click on ' Use Immediately ' to import the template's contents to the EdrawMax canvas. You can start customizing the PESTEL analysis diagram as per your requirements. If you want to draw the PESTEL analysis diagram from scratch, you can click ' + .' It will open up the user-friendly canvas of EdrawMax that has several features that ease your efforts in making PESTEL analysis diagrams.

• Step - 3: Add Textual Information

PESTEL Analysis diagram requires you to add Political, Economic, Sociological, Technological, Legal, and Environmental content so that the reader will understand what influences an organization. Use the PEST symbols from the left side and add the content to your PESTEL analysis diagram.

• Step - 4: Customize

EdrawMax gives you ample options to customize your PESTEL Analysis diagram. From changing the background to adding content, you can customize the diagram in any way you desire. In addition to this, you can go ahead and change the background color, modify the text, add hyperlinks, add multiple pages, add images, and even add vector-enabled texts to your PESTEL analysis diagram.

• Step - 5: Export & Share

Once satisfied with your PESTEL Analysis diagram, you can export it into multiple formats, including Microsoft, JPEG, PNG, Visio, HTML, and more. EdrawMax lets you share your PESTEL Analysis diagram on social media platforms, like Facebook, Twitter, Line, etc.

5. Key Takeaways

The Toyota PESTEL Analysis carried out in this article gives a detailed view of several factors. It plays a significant role in uplifting or degrading the company. It is primarily a study to analyze and understand the opportunities and drawbacks of the macro-environments of a global company that operates in many different nations with different political, economic, sociocultural, technological, environmental, and legal statuses. The PESTEL analysis of Toyota shows how a multinational brand can take the opportunity from some situations and why some issues they should avoid to keep the growth margin growing.

A detailed Toyota's PESTEL analysis report is an essential management tool that can help the company understand all the factors that influence it. As you analyzed in this article, creating and sharing a PESTEL analysis diagram with EdrawMax Online is easy, efficient, and affordable. This free PESTEL analysis diagram software offers many elements that ease your efforts when creating complicated PESTEL analysis diagrams. With the help of EdrawMax, you can also share your diagrams on different social media platforms, like Facebook, Line, Pinterest, and more.

Pratap, A., 2022. TOYOTA PESTEL ANALYSIS. , [online]. notesmatic. Available at: https://www.notesmatic.com/toyota-pestel-analysis/ (Accessed 31 August 2022).

Shaw, A., 2022. PESTLE Analysis of Toyota | SWOT & PESTLE Analysis. , [online] SWOT & PESTLE Analysis. Available at: https://swotandpestleanalysis.com/pestle-analysis-of-toyota/ (Accessed 17 August 2022).

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Toyota PESTEL/PESTLE Analysis & Recommendations

Toyota Motor Corporation’s opportunities and threats are identified in this PESTEL/PESTLE analysis. The automotive industry is subject to a variety of political, economic, social, technological, ecological, and legal factors (the PESTEL factors). Toyota’s business performance depends on how well it addresses these external factors. The external factors also represent trends that come with changes in the market for cars and related products. Toyota needs to adjust its strategies to address the PESTLE factors, accordingly. Doing so optimizes the company’s chances of outperforming competitors and achieving a strong business position for long-term success in the automotive industry.

Effectively addressing the concerns highlighted in this PESTEL/PESTLE analysis supports the achievement of strategic goals based on Toyota’s corporate vision and mission statements . These goals relate to the opportunities and threats in the business environment. Strategic fit and higher chances of success are achieved by matching Toyota’s competencies to the external factors identified in this PESTEL analysis. The company also benefits from aligning its products to the trends shown in this PESTLE analysis, such as the economic and social trends that influence customers and market demand for automobiles.

Political Factors Affecting Toyota’s Business

The automotive company is subject to the effects of political conditions. This dimension of the PESTEL analysis identifies the impacts of government on firms and industries. In Toyota’s case, the following are the significant political external factors in the remote or macro-environment:

• Political stability in most major markets (opportunity)
• Free-trade agreements (opportunity)
• Governmental support for eco-friendly products (opportunity)

The political stability of major markets is an opportunity for Toyota to grow with minimal political tension. Also, free-trade agreements involving countries where the company operates present opportunities for improved market penetration. This PESTLE analysis identifies governmental support for ecofriendly products as an opportunity for the company to improve its vehicles to satisfy or exceed environment-focused standards. Thus, business growth opportunities are available, based on the political external factors in this PESTLE analysis of Toyota.

Economic Factors

Economic trends influence the organizational development of the automotive firm. This dimension of the PESTEL analysis determines the effects of economic situations or changes on business. In Toyota’s case, the most significant economic external factors in the industry environment are as follows:

• Weak Yen vs. U.S. Dollar (opportunity)
• Growth of the U.S. economy (opportunity)
• Rapid growth of developing countries (opportunity)

Toyota has the opportunity to improve its exports from Japan based on the weakness of the Japanese Yen. This PESTLE analysis also points to the company’s opportunity to grow its business in the U.S., which is one of the world’s biggest automobile markets. In addition, the rapid growth of developing economies presents the opportunity for the firm to improve revenues based on these markets. In this dimension of the PESTLE analysis, the main economic external factors create opportunities for automotive business growth. Toyota’s generic competitive strategy and intensive growth strategies can focus on business growth based on these economic factors.

Social/Sociocultural Factors Influencing Toyota’s Business Environment

This dimension of the PESTEL analysis pertains to the impact of sociocultural trends on the automaker’s customers and their buying behaviors. The following are the social/sociocultural external factors in Toyota’s remote/macro-environment:

• Increasing interest in hybrid cars (opportunity)
• Increasing interest in electric cars (opportunity)
• Widening wealth gap (threat)

Toyota has the opportunity to provide more products that satisfy customers’ increasing interest in hybrid and electric vehicles. However, in this dimension of the PESTLE analysis, the widening wealth gap equates to a possible decline in demand for cars in some market segments. Toyota’s organizational culture encourages employees’ awareness of the social situation of the industry environment. This aspect of the company supports competitiveness by informing strategic decisions pertaining to the factors in this dimension of the PESTEL analysis. Also, Toyota’s marketing mix (4P) keeps adapting to the social situation to effectively appeal to target customers. Social factors affect the success of the automotive company’s marketing strategies.

Technological Factors in Toyota’s Business

This dimension of the PESTEL analysis determines the influence of technologies or technological trends on the automotive business. The following are the technological external factors in Toyota’s industry environment:

• Continuing increase in e-commerce applications (opportunity)
• Increasing use and dependence on mobile technology (opportunity)
• Cybercrime (threat)

Toyota has the opportunity to improve its e-commerce capabilities or to exploit third-party e-commerce service providers to sell some of its products, such as spare parts and accessories. Also, this PESTEL analysis points to the company’s opportunity to enhance its mobile apps and related services to increase customer engagement and loyalty, which can strengthen the brand image and the likelihood of car sales. However, the company must address the threat of cybercrime, including corporate cyber-espionage. This dimension of the PESTLE analysis of Toyota shows major technological opportunities, although the firm must address the threat of cybercrime through suitable technological security measures. The issues in this dimension of the PESTEL analysis of the automotive business require technological capabilities linked to the business strengths described in the SWOT analysis of Toyota . The company’s business processes are designed to meet technological challenges. Toyota’s operations management involves technological resources and technology-focused innovation to take advantage of the opportunities in this dimension of the PESTLE analysis.

Ecological/Environmental Factors

Toyota includes ecological concerns in its strategic decision-making. This dimension of the PESTEL analysis identifies concerns regarding the natural environment in relation to business. In Toyota’s case, the major ecological/environmental external factors in the remote or macro-environment are as follows:

• Climate change (opportunity)
• Declining global oil reserves (opportunity)
• Increasing emphasis on business sustainability (opportunity)

Toyota has opportunities to provide more environment-friendly products, such as electric cars or cars with higher fuel efficiency. The company also has the opportunity to increase its sustainability performance through improvements in business process efficiency. In this dimension of the PESTLE analysis, the major ecological/environmental factors present opportunities that the automaker can use for further growth. Toyota’s corporate social responsibility strategy deals with ecological concerns. This strategy creates opportunities for the company to improve its brand image while making its automobiles more competitive. However, to address the external factors described in this PESTEL analysis, similar corporate citizenship strategies are used in the operations of competitors, like Tesla , General Motors , Ford , and Honda. Thus, in terms of the factors in this dimension of the PESTEL analysis, firms’ strategies compete, adding to the strong pressure of competition described in the Five Forces analysis of Toyota .

Legal Factors

Legal systems impact the automotive company’s business limits, requirements, and options. This dimension of the PESTEL analysis determines the laws and regulations that affect business. In Toyota’s case, the following are the most significant legal external factors in the industry environment:

• Improving intellectual property laws (opportunity)
• Increasingly complex environmental laws (opportunity)
• Increasingly complex consumer laws (opportunity)

Toyota has the opportunity to grow with reduced concerns for infringement of its intellectual property rights because governments are working toward improving intellectual property protection. This PESTLE analysis also shows the company’s opportunity to provide higher-quality cars that satisfy or exceed requirements based on environmental laws. In addition, the company can exploit the opportunity of offering safer and more satisfactory products to fulfill or exceed consumer laws. Thus, in this dimension of the PESTLE analysis, Toyota has opportunities based on legal external factors.

Strategic Points – PESTLE/PESTEL Analysis of Toyota

The external factors identified in this PESTEL/PESTLE analysis of Toyota’s remote or macro-environment mostly create opportunities for the company. For instance, the firm can focus on product development to exploit opportunities in the market. The automaker can also improve business operations and market presence to exploit opportunities based on the economic external factors in this PESTLE analysis. However, Toyota must address threats linked to the widening wealth gap and the rising frequency of cybercrime. Technological measures and product innovation are beneficial in this endeavor. Thus, this PESTEL analysis of Toyota shows significant opportunities for growth and stability despite the identified threats.

• Phan, S. (2021). The effect of PESTLE factors on development of e-commerce. International Journal of Data and Network Science, 5 (1), 37-42.
• Toyota Motor Corporation – Form 20-F .
• Toyota Motor Corporation – Governance .
• Toyota Motor Corporation – Sustainability .
• U.S. Department of Commerce – International Trade Administration – Automotive Industry .
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• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

Internal Environment Analysis of Toyota

Internal Environment Analysis of Toyota will be conducted in this report. SWOT analysis and BCG matrix of the company will be analysed to show the internal capabilities of the company. Competitive analysis has also been conducted by applying Porter’s five forces model on Toyota.

You may also feel interested to read the blogs: Unique Selling Point of Toyota External Environment Analysis of Toyota Risk Management at British Airways PESTEL, SWOT and Porter’s Five Forces Model of MC Donald’s

Contents in this Page

SWOT Analysis of Toyota:

Strengths, Weakness, Opportunities and Threats of Toyota has been presented below:

BCG Matrix of Toyota:

The competitive advantages of business units are analysed through the BCG matrix. This analysis will show Toyota which products they should focus more and should not focus on. BCG matrix of Toyota has been evaluated below:

Star : Financial services strategic business unit of Toyota falls in the category of stars. The company earn high profit from the sector, and it has the potential to bring more profit in future (Coetzee et al., 2016). The brand strategic business unit of Toyota also falls in this category. The company attains 20% of its market share from this business and is forecasted to increase the profit of this sector by about 5 % within the coming years (Chiarini, and Vagnoni, 2015). It indicates the growth rate will remain high in this sector. Toyota should increase their sales of this service through market penetration therefore, customers of untapped areas will get the service, and it will bring more profit.

Cash Cow : Supplier management service strategic business falls in the cash cow category of the BCG matrix (Dillon, 2019). The company have generated a specific amount of revenue from this service, but the market is declining. Therefore, Toyota should stop investing in this sector but operate it to attain profit as long as possible without new investment. Number 3 brand strategic business unit also falls in this category. The market share of this sector is also falling in past years, but this sector has the potential to attain more market share. The company should invest in R&D to grow in this category and earn profit.

Question Mark : Local food strategic business is the product of question marks in the BCG matrix of Toyota (Coetzee et al., 2016). Customers are becoming weaker to local foods. Therefore, this sector refers high growth rate for the company. Toyota should invest in this sector to achieve high growth and become profitable. The confectionary strategic business unit also falls in a question mark. This sector has a slow growth rate but can increase growth by investing in it.

Dogs : The dog category product of Toyota is the plastic bags business unit which they have been facing loss for some years (Toivonen, 2015). Because of increasing awareness toward saving the global environment the market is declining. Therefore, the company should stop investing in this product. Synthetic fibre products also belong to the dos category and the market is falling. They should not invest in this product anymore to avoid more loss.

Competitive Analysis of Toyota

Porter’s five forces model of toyota.

Porter’s five forces model has been applied to Toyota to analyse the competitive position of the company.

The threat of new entrants : Low : Barriers of this industry will not permit new entrants to enter in the sector easily, and it needs huge capital. Therefore, new companies are unable to invest a huge amount of capital. Even the global presence and brand value of Toyota are impossible to replace for new companies (Frisch et al., 2016).

The threat of substitutes: Medium: There are some substitutes for Toyota products that customers can switch to. Switching costs for cars are less than Toyota. Therefore, the risk is medium for the company. But the company have started producing cars which are fuel efficient in order to reduce customers’ cost and hold them (Yoshida, and Kojima, 2015).

Bargaining power of buyers : High : The bargaining power of customers is high for Toyota (Matsuo et al., 2016). Because of the lower switching costs of other companies, customers can switch to other companies’ services. Customers choose a suitable option for themselves. To maintain customers’ demand, Toyota delivers the latest cars which helps them to maintain its customer base.

Bargaining power of suppliers : Low : The bargaining power of suppliers in front of Toyota is weak (Kojima, and Fukazawa, 2015). It has a large number of suppliers globally and, therefore can manage mechanisms from anyone of them. Toyota is a world brand. Therefore, suppliers get benefited from the company, which is another reason for its weakness.

Competitive rivalry : High: Ford, Volkswagen, Suzuki, Nissan, Honda, General Motors, BMW & Mercedes are the key competitors of Toyota (Notesmatic, 2019). All of these companies are investing more in R&D and focusing on customers’ convenience. Therefore, Toyota faces high competition in the industry.

Toyota Europe, 2020. Toyota in the world. Retrieved from: https://www.toyota-europe.com/world-of-toyota/this-is-toyota/toyota-in-the-world . [Assessed on: 1 March 2020]

Toyota Global, 2014. Annual Report of Toyota 2014. Retrieved from: https://www.toyota-global.com/pages/contents/investors/ir_library/annual/pdf/2014/ar14_e.pdf . [Assessed on: 2 March 2020]

Toyota Motor Corporation, 2020. Toyota Environmental Challenge 2050. Retrieved from: https://global.toyota/en/sustainability/esg/challenge2050/ . [Assessed on: 3 March 2020]

Tomiyama, E., 2014. A Study of Semi Knock Down (SKD) Production and Sales and Marketing Strategy in the Russian Far East.  The ortheast sian conomic eview .

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Toyot Internal And External Environment Analysis Of Toyota

Show More Toyota – Internal and External environment analysis. Internal business environment. The internal business environment is composed elements within the organization. It includes factors within that have an impact on the approach and success of your companies operations. The elements includes current employees, management and of which a huge part is corporate culture -better known as the behavior of employees. Resource Based analysis Toyota Motor corporation . 1.Man – Toyota is an employer for more than 300000 employers. (Toyota annual Report 2011). Human resource management is an essential asset to Toyota as they are responsible for implimenting the company’s strategies and operations and plays a key factor in the success of Toyota. 2.Machines …show more content… Unit Cellar. This unit deals with unit-related technological development, manufacturing technology development and production. Outbound Logistics – Toyota has around 170 distributors and 8900 dealers outside of Japan. They uses local routes, railroads and trucks to transport it’s vehicles from the assembly plants to dealers. They also different distrubution strategies depending on the Market. Marketing and sales – Toyota focuses on innovativeness and efficiency of the brand as well as integration of the brand. The marketing strategy of Toyota utilizesa combinization of print and media advertising, sales promotion, public relations and direct marketing techniques with a focus on TV advertising. Service – Toyota still operates under a principle declared in “The Toyota Precepts” in 1935, called “The Customer Always Comes First”. It is reflected in all besiness processes and procedures of the company. SWOT Analysis: Strengths Weaknesses 1. -Strong focus on research and development (R&D) 2. -The most valuable automotive brand in the world 3. -Toyota Production System 4. -Competence in hybrid vehicle production 1. -Lack of competence in autonomous vehicles 2. -Negative publicity due to large vehicle …show more content… -Rising use of e-commerce -Mobile Technology trend This creates an opportunity to improve sales on some of it’s products such as spare parts. The company must address the threat of cybercrime. By establishing security measures. Environment Ecological concerns should be included in Toyota’s strategic decision making. The major external factors in the Macro-Environment are climate change, declining global oil reserves and increasing emphasis on business sustainability. Toyota should use the opportunities they have to provide more environmentally friendly products. They should use the external factors available in order for the company to grow further. Legislation This part of the analysis model determines the law and regulations that affect the business. The most significant legal factors in the Macro environment are: -Improving intellectual property laws -Increasingly complex environmental laws -Increasingly complex consumer laws Toyota has the opportunity to grow with minimal concers. They also have the opportunity to provide higher quality products that satisfy the requirements of the

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Toyota motor corporation pestel & environment analysis, strategic management essays, term papers & presentations.

Toyota Motor Corporation PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Toyota Motor Corporation. Changes in the macro-environment factors can have a direct impact on not only the Toyota Motor Corporation but also can impact other players in the Automobiles & Parts. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Consumer Goods industry.

PESTEL analysis provides great detail about operating challenges Toyota Motor Corporation will face in prevalent macro environment other than competitive forces. For example an Industry may be highly profitable with a strong growth trajectory but it won't be any good for Toyota Motor Corporation if it is situated in unstable political environment. Spanish oil giant Repsol had to face a similar instance. It started an above average profitability operations in Argentina and made strong returns in 5-7 years. But the business was later expropriated by the Left Wing government. So the decade long profits didn’t materialize in the end.

Political Factors that Impact Toyota Motor Corporation

Political factors play a significant role in determining the factors that can impact Toyota Motor Corporation's long term profitability in a certain country or market. Toyota Motor Corporation is operating in Automobiles & Parts in more than dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic Automobiles & Parts industry across various countries is to diversify the systematic risks of political environment. Toyota Motor Corporation can closely analyze the following factors before entering or investing in a certain market-

• Political stability and importance of Automobiles & Parts sector in the country's economy.
• Risk of military invasion
• Level of corruption - especially levels of regulation in Consumer Goods sector.
• Bureaucracy and interference in Automobiles & Parts industry by government.
• Legal framework for contract enforcement
• Intellectual property protection
• Trade regulations & tariffs related to Consumer Goods
• Favored trading partners
• Anti-trust laws related to Automobiles & Parts
• Pricing regulations – Are there any pricing regulatory mechanism for Consumer Goods
• Taxation - tax rates and incentives
• Wage legislation - minimum wage and overtime
• Work week regulations in Automobiles & Parts
• Mandatory employee benefits
• Industrial safety regulations in the Consumer Goods sector.
• Product labeling and other requirements in Automobiles & Parts

Economic Factors that Impact Toyota Motor Corporation

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. Toyota Motor Corporation can use country’s economic factor such as growth rate, inflation & industry’s economic indicators such as Automobiles & Parts industry growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname-- sector but also that of the organization. Economic factors that Toyota Motor Corporation should consider while conducting PESTEL analysis are -

• Type of economic system in countries of operation – what type of economic system there is and how stable it is.
• Government intervention in the free market and related Consumer Goods
• Exchange rates & stability of host country currency.
• Efficiency of financial markets – Does Toyota Motor Corporation needs to raise capital in local market?
• Infrastructure quality in Automobiles & Parts industry
• Comparative advantages of host country and Consumer Goods sector in the particular country.  
• Skill level of workforce in Automobiles & Parts industry.
• Education level in the economy
• Labor costs and productivity in the economy
• Business cycle stage (e.g. prosperity, recession, recovery)
• Economic growth rate
• Discretionary income
• Unemployment rate
• Inflation rate
• Interest rates

Social Factors that Impact Toyota Motor Corporation

Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at Toyota Motor Corporation will understand the customers of a given market and how they design the marketing message for Automobiles & Parts industry consumers. Social factors that leadership of Toyota Motor Corporation should analyze for PESTEL analysis are -  

• Demographics and skill level of the population
• Class structure, hierarchy and power structure in the society.
• Education level as well as education standard in the Toyota Motor Corporation ’s industry
• Culture (gender roles, social conventions etc.)
• Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don’t.
• Attitudes (health, environmental consciousness, etc.)
• Leisure interests

Technological Factors that Impact Toyota Motor Corporation

Technology is fast disrupting various industries across the board. Transportation industry is a good case to illustrate this point. Over the last 5 years the industry has been transforming really fast, not even giving chance to the established players to cope with the changes. Taxi industry is now dominated by players like Uber and Lyft. Car industry is fast moving toward automation led by technology firm such as Google & manufacturing is disrupted by Tesla, which has stated an electronic car revolution. A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts -

• Recent technological developments by Toyota Motor Corporation competitors
• Technology's impact on product offering
• Impact on cost structure in Automobiles & Parts industry
• Impact on value chain structure in Consumer Goods sector
• Rate of technological diffusion

Environmental Factors that Impact Toyota Motor Corporation

Different markets have different norms or environmental standards which can impact the profitability of an organization in those markets. Even within a country often states can have different environmental laws and liability laws. For example in United States – Texas and Florida have different liability clauses in case of mishaps or environmental disaster. Similarly a lot of European countries give healthy tax breaks to companies that operate in the renewable sector. Before entering new markets or starting a new business in existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -

• Climate change
• Laws regulating environment pollution
• Air and water pollution regulations in Automobiles & Parts industry
• Waste management in Consumer Goods sector
• Attitudes toward “green” or ecological products
• Endangered species
• Attitudes toward and support for renewable energy

Legal Factors that Impact Toyota Motor Corporation

In number of countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of organization’s secret sauce thus the overall competitive edge. Some of the legal factors that Toyota Motor Corporation leadership should consider while entering a new market are -

• Anti-trust law in Automobiles & Parts industry and overall in the country.
• Discrimination law
• Copyright, patents / Intellectual property law
• Consumer protection and e-commerce
• Employment law
• Health and safety law
• Data Protection

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Pestle analysis of toyota, introduction .

Pestle analysis of Toyota Motors Corporation. Toyota is a multinational Japanese automotive manufacturing company. Kiichiro Toyota established the automotive company on Aug 28, 1937. Toyota’s headquarter is situated in Toyota City, Aichi, Japan.

Toyota, Ranz, Gazoo Racing, Daihatsu, Scion, Hino, TRD, and Lexus are some of the brands of Toyota Motors Corporation under which the company sells its automobiles. The automotive company has a shared stake in various other brands like;  3.8%  in Yamaha Motors Corporations,  20.02%  in Subaru Corporation,  2.8%  in Panasonic,  5.9%  in Isuzu,  5.1%  in Mazda, and  4.8%  in Suzuki.

Toyota is one of the largest listed companies in terms of market capital both in Japan and across the world. The automotive brand is operating its business in approximately more than  170  countries. Approximately  364,445  people are working for the company to manage its worldwide operations. The brand is the largest vehicle seller and manufacturer after Volkswagen.

Some of the main products and services of Toyota are Lexus, boats, Sports Cruisers, SUVs, Sedan Vehicles, Sports Vehicles, Minivans, Hatchbacks, Busses, Trucks, and Station Wagons.

Some of the main competitors of Toyota Motors are Suzuki, Honda,  BMW , Volkswagen,  Tesla , and Ford.

Today, we’ll discuss the pestle analysis of Toyota. It would focus on the macro-environmental factors like political, economical, social, technological, legal, and environmental issues of the automotive company. For internal factors, check out the  swot analysis of Toyota . Here’s the pestle analysis of Toyota as follows;

Political factors impacting Toyota 

Global brand.

Toyota is a multinational global brand and operating its business in over 170 countries. The automotive company is subject to various political influences and government regulations. Therefore, the brand has to keep in mind the worldwide influences.

Political Environment

The political environment of any country impacts the decision making of the multinational brand. For instance, Toyota was going to invest approximately over 69 million dollars in Thailand back in 2014. The protests and processions destabilized the political environment of the country. The automotive company changed its expansion plan and shifted its focus to other countries.

Conflict with China

The conflict between  China  and Japan is no secret to anyone, and Toyota is a Japanese brand. China has become the world’s largest tech and industrial economy of the world. Whenever any political event or rumor happens, it instigates the old rivalry and conflict. It negatively impacts the businesses in both countries. That’s how the political relationship among different countries is also important.

Demonetization in India

When the Indian government declared the demonetization of currency notes back in 2016 and 2017, it created a shortage of cash in the local market. It decreased the sale of many businesses. The sale of Toyota’s automobiles also declined. The automotive market is growing very slowly since then.

Economical factors affecting Toyota 

Competitors.

The automotive market has become very competitive in recent years; Tesla, Ford, BMW are some of the major competitors. The high level of competition is financially impacting the sale of the automotive brand. It also puts pressure on the company to increase the research and development budget in terms of innovation. The brand has to perform better in order to satisfy the needs of customers.

Economic Recession

According to a financial estimate, Toyota’s annual revenue was  241.196  billion dollars by the end of 2020 and it has declined  13.59% . Out of which the company’s net profit was  13.280  billion dollars and it has declined by  23.47% .

The decline in annual revenue and net profitability of Toyota is because of the pandemic of covid-19 . Millions of people across the world lost their jobs during the pandemic months. It created an environment of financial insecurity and uncertainty and dropped the buying power of people. Ultimately, the economic recession impacts the sale of the automobile company.

Electric Vehicles & Oil Price

The economic recession and increasing oil prices have shifted the interest of the people towards fuel-efficient cars. Toyota is already manufacturing hybrid and electric vehicles. Now, the company has to increase the process and make the products available to the customers at a mass scale.

Some countries are even providing the tax exemption on the sale and trade of electric vehicles. Toyota should speed up the process to capitalize on this opportunity.

Social factors affecting Toyota 

Vehicles recalling.

The vehicles of Toyota contained have a faulty fuel pump, and the automotive brand had no choice but to recall over  700,000  vehicles. It not only hurt the company financially, but it also made people question the credibility of the brand. The company fixed the problem, but it left a bad taste in the minds of people.

Electric Vehicles

As we know that the people across the world have become environmentally conscious and they prefer eco-friendly vehicles. Toyota should shift its focus to the mass production of electric and hybrid vehicles. It would help the company to attract the attention of the eco-friendly customer market.

Safety Issues

Safety features are the basic and essential element of any vehicle. When some of the vehicles of Toyota lost safety controls due to the faulty acceleration and pedal system, it endangered the lives of many customers. Many people became outraged because of it and the company has to billions of dollars to fix it. But that wasn’t enough for many customers; they lost the trust in the company.

Economical Indian Market

The “Innova” model of Toyota became so popular in the Indian market that many families started buying the vehicle for their family tours. The brand kept in mind the conditions of the Indian market. It turned out to be perfect because the company offered them the low priced vehicle to the price-conscious market.

Technological factors impacting Toyota 

Hydrogen cars.

Toyota allocates billions of dollars annually for research and development in order to develop something to gain a competitive. The brand first introduced the hydrogen car in the market. The object was to meet the demands of the market. Hydrogen and electric cars are the current and future trends toward clean energy. Automotive companies like Toyota are working on it to be more efficient.

Accepting Technology

Toyota has always accepted the latest technological trends. It has helped the company to stay on top of the global market. Most importantly, the brand follows the simple formula of continuous improvement, and technology helped the company to achieve it.

Legal factors affecting Toyota 

Recall settlement.

When Toyota recalled the faulty vehicles, the outraged customers filed a class-action lawsuit against the company. The automotive brand had no choice but to settle the case for 1.2 billion dollars plus fixing the faulty damages.

Prius Auto Industry, an Indian automotive company, filed a lawsuit against Toyota on the trademark. The company lost the legal battle and the Delhi court permitted the opponent to use the trademark “Prius.”

Environmental factors impacting Toyota

Zero carbon emission.

Toyota is very well familiar with the environmental challenges. That’s why the company is producing electric, hybrid, and hydrogen vehicles to address the environmental issues.

The automotive brand laid out the future environmental plan for 2050 in 2015. It included steps like recycling-based sustainable society, optimizing the usage of water, zero carbon emission, and plant and life cycle zero carbon emission.

Conclusion 

After a careful study of the pestle analysis of Toyota, we have concluded that Toyota is the world’s top automotive company. The costly lawsuits, faulty vehicles, and environmental challenges are serious threats to the company. Toyota should capitalize on its brand image and the trend of electric vehicles to increase the market share.

Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.

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