Business in Europe: Opportunities and Challenges for Toyota in Germany, Sweden and Finland

This study is aimed at understanding the business opportunities and challenges in Europe. It specifically deals with three European countries Germany, Sweden and Finland. These countries were chosen to identify the best of these markets for Toyota. The paper covers the current challenges of doing business in Europe. It also includes the PESTLE and Porter’s five forces analysis of Germany, Sweden and Finland. Based on the findings, the paper identifies Germany as the most suitable of three markets for Toyota to set up the manufacturing and distribution facilities. The paper also gives the business and the entry strategies to follow while doing business in Europe.

Running head: BUSINESS IN EUROPE
Business in Europe
[Automobile Industry]
Name of the student:
Name of the university:
Author note:

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Executive summary
This study is aimed at understanding the business opportunities and challenges in Europe. It
specifically deals with three European countries Germany, Sweden and Finland. These countries
were chosen to identify the best of these markets for Toyota. The paper covers the current
challenges of doing business in Europe. It also includes the PESTLE and Porter’s five forces
analysis of Germany, Sweden and Finland. Based on the findings, the paper identifies Germany
as the most suitable of three markets for Toyota to set up the manufacturing and distribution
facilities. The paper also gives the business and the entry strategies to follow while doing
business in Europe.

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Table of Contents
Introduction......................................................................................................................................3
Question 1: Stating the reasons to select EU for the manufacturing plant......................................3
Question 2: Institutional and policy challenges and advantages within the EU..............................5
Question 3: Assessing Germany, Finland and Sweden for checking the suitability for production
and distribution facility & recommending the one..........................................................................7
Recommending one out of Germany, Finland and Sweden......................................................12
Question 4: Factors to consider in setting up the production and distribution facility..................12
Question 5: Recommending a strategy for the company entering and successfully operating its
business in the EU market.............................................................................................................14
Entry strategy.............................................................................................................................15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17

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Introduction
The study is based on doing business in Europe. The purpose is being served through a
comparative discussion on the three chosen European countries Germany, Sweden and Finland.
The comparative discussion is being constructed in reference to the chosen industry and the
business that is assumed as intending to enter the European market. Business in European
countries is a result of globalisation which promoted the flow of goods, services, technologies
and lot more between countries in different regions. Globalisation in Europe is both proactive
and reactive. European countries seek new markets and also that it face an increasingly growing
competition due to the entrance of new businesses (Pain et al. 2016). Factors that set up the
business environment for foreign companies include such as easier process for a business startup
and access to credit (Korhonen et al. 2015). The United States of America is the biggest
beneficiary of EU funds and also the biggest investor (Ahl and Nelson 2015). These all validates
a point that Europe is highly influenced from the globalised economy.
The study is, therefore, aimed at identifying the possible challenges and opportunities that
Toyota may have while doing business in Europe. In course of the purpose, the study also
examines the three chosen countries and identifies the best of the selected locations for Toyota.
Question 1: Stating the reasons to select EU for the manufacturing plant
It is very engaging and time consuming also to shortlist the one foreign location for a
business expansion. Being engaged to the import-export trading is a different thing than entering
a new location and also establishing the manufacturing & distribution facilities. A number of
factors in the target foreign country do really test the business intelligence of the company in

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concern. Business intelligence is required to understand the best countries to enter. Best
countries are those that have more opportunities than the barriers to the business. Opportunities
can include the list of thing like the technological advancement, easier policies for business set
up, static government policies, potential consumer base, skilled & cost-effective labour market,
favourable external environment and a fairer competition policies. These factors can also act as
barriers to foreign business if not being supported with effective policies for a foreign business
(Vahlne and Johanson 2017).
In a likewise manner, Europe offers a bunch of opportunities and challenges as well to
foreign companies. Companies intending to enter Europe get an access to the single biggest
market. Drivers of internationalisation are market drivers, government drivers, cost drivers and
the competitive drivers (Chetty, Ojala and Leppäaho 2015). These drivers are the biggest
opportunities for the foreign companies. In context to market drivers, companies get the similar
kind of customers in the different states of Europe. It means that customers are global in nature
and also that the similar or same marketing strategies are transferrable to different states. Cost
drivers include economies of scale, favourable logistics and the country-specific dissimilarities.
Trade policies, policies of host government and the technical standards are all the government
based drivers. European countries are interdependent between each other which are also one of
the elements of competitive drivers. Interdependency is good for a flow or exchange of goods
and services between the European countries. Competitors follow or adopt the global strategies
which enhance the level of competition in among the businesses (Surugiu and Surugiu 2015).
The list of opportunities as listed above is an enough evidence of why foreign companies
prefer entering the European market. The listed opportunities are very hard to get in other parts
of world. Notably, European firms are widely recognised for their efficiency to play at the global

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level; however, those firms have declining importance for manufacturing (Bailey and De Propris
2014). Foreign companies with its intention to set up manufacturing facilities in Europe will
certainly be welcomed and rather face a minimal competition from the competitors.
Question 2: Institutional and policy challenges and advantages within the EU
Toyota can face the institutional and policy based challenges while operating in Europe.
European integration was a result of political, economic and security reasons. Countries were
economically integrated to avoid any possible conflict and to discourage the repetition of thing
that had happened post World War II (Kesternich et al. 2014). Economic integration was done to
create the peace and include the defeated Germany in the post-war reconstruction (Wagner
2015). An open economy for supporting the interdependent trades was a result of protectionism
which was identified as the root cause behind economic instability in 1920s and 1930s
(Mitchener and Wandschneider 2015).
Key achievements of European Integration
Economic reconstruction: Rectification of economic destruction caused during the
wartime. Protectionism had badly affected the European economy during 1920s and 1930s
(Mitchener and Wandschneider 2015).
Political/security in Europe post World War II: It has resolved the ideological differences
in political and economic states of France and Germany. Those had emerged as the two
superpowers in Europe (Kesternich et al. 2014).

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A single market: The integration had also facilitated the flow of services, goods and
technologies between 28 member states in the European nation. There are no restrictions over the
citizens as they can freely move to and settle in any of the member state (Polyakova and
Fligstein 2016).
The existence of single currency: The Euro is the single currency which is spread across
the different member states in the European nation. The Euro is now also one of the major
currencies of world (Ito and Kawai 2016).
The economic integration has also helped Europe to become the world’s largest supplier
of aid programmes for humanitarian and development. Europe now holds a powerful status in
finance and the world trade. It is also the major destination for and source of FDI (Webber
2014).
Challenges
Migration crisis in EU is growing which puts the challenge to freedom of movement in
the region (Perkowski 2016). This may not be a point to worry for the foreign business; however,
it really proves such claims fake which had supported the freedom of movement for citizens.
Brexit may expectedly affect the political and economic state of the member states of the
European nation. The biggest impact would be experienced by countries closest to the UK such
as the Netherlands and Belgium. This will also affect the countries with high trade volumes such
as France and Germany (Politico.eu 2018). Ireland will perhaps be highly affected of due to its
broad and profound economic links with the UK. Expectedly, there can be huge losses to jobs in
Belgium. France is worried particularly for the automotive sector. Trade flows between the ports
of Dover and Calais may be negatively impacted from the Brexit impact. The migration of

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people will be a great challenge. Dealing with list of issues such as migration of people, citizens
returning to their home countries from the UK and the reduced tourism will test the member
states in the European nation (Politico.eu 2018).
Question 3: Assessing Germany, Finland and Sweden for checking the suitability for
production and distribution facility & recommending the one
SWOT of Toyota
Strengths  Toyota has very intense focus on Research &
Development (R&D)
 It is according to many the most valuable car makers in
the world
 Toyota production system is its USP which is follows the
just-in time strategy
 Toyota’s competence in the production of hybrid vehicle
is unmatched and is also very difficult to replicate by
others
Weaknesses  Less competent in the production of autonomous vehicles
 Large vehicle recalls and the subsequent negative
publicity
 Unimpressive brand portfolio
Opportunities  Fuel prices are expected to rise further which means

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hybrid vehicles would be in high demands
 Demand for autonomous vehicles is expected to pick up
Threats  The automotive industry in particular is set to face a
various government regulations
 Huge competition between number of car makers in the
world
Table 1: SWOT of Toyota
(Source: Sisson and Elshennawy 2015)
The production system of Toyota and its capability to invest more on R&D will probably be the
supporting factors for the company in Europe. However, government policies for automotive
industry and the increasing competition between the numbers of car brands are the factors to
look for.
PESTLE of Germany, Finland and Sweden
Germany Finland Sweden
Political  Germany has
better
relationships
with
approximately
around 200
countries
 Member of
 World leader in
regards to
business and
trade freedoms
 Member of
NATO
 Very safe and
politically
stable country
 Corruption is
protected
through
suitable laws

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OECD, NATO,
the International
Monetary Fund
(IMF) and the
World Bank
Economic  Germany is the
largest economy
in Europe
 Trading
partnerships with
France, the USA,
Great Britain and
the Netherlands
 Very high
reputation in car
manufacturing
 Very poor in raw
materials
 Germany spends
much than the
average
spending of
Europe on R&D
 Finland is open
to FDI
 High
government
spending
 Rigidity of
labour market
 Prevention
strategies to
avoid the
long-term
unemploymen
t
 Unbiased
behaviour
with foreign
investors in
terms of
providing the
credits

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Social  German
consumers give
high values to
quality
 Business deal
focuses the
mutual benefits
as the central
attention is just
the task
 Counted as one
of the modern
countries
 Consumers in
Finland are very
educated
 Corruption does
not exist
 Consumers
are very
specific with
price
 Quality is the
secondary
concern
Technological  Highly reputed
for innovation
and engineering
excellence
 Germany gives
high regards to
new
technologies
 The country is
an international
leader in regards
to capacity for
innovation
 Keen to develop
its innovating
capability
 R&D
improvement is
also in progress
 Sweden ranks
the 1st in the
ICT
development
index (IDI)
 One of the
most
innovative
countries in
the world
 The
technological
sector is

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 Internationally
recognised for
R&D spending
and scientific
research
institutions
 Germany
promotes the
innovative
companies
booming
 R&D
spending from
Swedish firms
is nearly
double the
rate of those
in Britain
Environmental  Largest carbon
emitter in
Europe
 Heading towards
the use of
renewable
energy resources
 Manufacturing
plants contribute
to the air
pollution
 Water pollution
from industrial
wastes
 Water
pollution due
to the wastes
 Set goals for
no greenhouse
gas emissions
by 2050
Legal  Legal system is
distributed in
three patterns
like Federal,
State and Local
 According to
 Trade policy is
in the line of
other member
states in the
European union
 Being a small
 Profits earned
by a foreign
business in
Sweden is
imposed with
just the

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foreign investors
Germany is
second only to
Britain in terms
of legal and
political stability
 FDI is highly
welcomed
country legal
terms are easily
manageable
normal
corporate
income tax
 Low rent
industrialized
parks are
offered
Table 2: PESTLE of Germany, Finland and Sweden
(Source: Giuliani et al. 2014)
Porter’s five forces
Bargaining
power of
buyers
Suppliers’
bargaining
power
Industry
rivalry
Threat of new
entrants
Threat of
substitutes
Germany High Low High Low Moderate
Finland High Moderate Moderate High Moderate
Sweden High Moderate High High Moderate
Table 3: Porter’s five forces of Germany, Finland and Sweden
(Source: Kräussl and Krause 2014)

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Entry barriers are very high in the German automotive industry. Entry barriers are quite low in
Finland. The market is now saturated for Swedish automotive industry.
Recommending one out of Germany, Finland and Sweden
Germany would be the highly preferred country for Toyota. Germany is politically and
legally more stable than Finland and Sweden. It means various policies governing the trades and
others would be very favourable. Industry rivalry though being very high in Germany should not
create a lot of trouble to the internationally acclaimed Toyota. Barriers to entry s very high in
Germany which means Toyota can depend upon the long-term competitive strategies. German
government does support firms those spend huge in R&D and innovation.
Question 4: Factors to consider in setting up the production and distribution facility
EU institutions and policy frameworks can produce both challenges and advantages to
Toyota. It is important for Toyota to understand the number of policies which will be required to
company for its operations. Additionally, Toyota must also seek information and assistance from
the key institutional bodies in EU. Following are the list of factors needed to be considered while
setting up the production and distribution facility (Surugiu and Surugiu 2015):
Type approval
It is essential to start with service of vehicles and its parts in Germany. It is also required
for registration and the selling rights.
Supply chain management

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This follows a purchase order business format usually within the contract structure
implemented by the automotive OEMs. This flows down similarly through the supply chain
covering the tier 1 suppliers and so on.
Distribution system
There are two levels of distribution system usually followed to sale the cars. One of the
two levels is the authorised dealers. The last level of the two involves the brand itself in
marketing and selling of cars.
Incentives for investment
No, however, indirect general incentives are applied to the purchase and use of EVs
(electric vehicles) under the German Motor Vehicle Tax Act (Vdik.de 2018).
Compliance safety
Product compliance safety: The product safety related aspects are governed by the
German Product Safety Act (ProdSG).
Environmental regulations: A non-compliance with environmental regulations in
Germany will lead to a withdrawal of relevant licences, administrative fines and mandatory
corrective measures.
Emissions: A non-compliance with emissions regulations will attract administrative fines,
prohibitions on introducing the concerned vehicles in the market, type approval withdrawal and
also the recalls.

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Carbon dioxide: On violating the maximum permissible limit, manufacturers will be
asked to pay a higher emissions premium.
Waste: A non-compliance with the related regulation will attract the administrative fines.
Intellectual property disputes
Germany is the venue for enforcing the intellectual property rights against the varied
types of infringement. German IP courts are very reliable in this context. IP rights include but are
not limited to like patents, designs or trademark.
Legal developments relating to automated vehicles
UNECE Regulation 79 is still under discussion. Even if automated vehicles are permitted
to operate, it will still have the drivers to monitor the progress and take the seat in case of a
technological failure. Automated vehicles have been tested on quite a several occasions on
German roads.
Question 5: Recommending a strategy for the company entering and successfully operating
its business in the EU market
Following is the list of strategies needed for business in the EU market (Radosevic and Stancova
2018):
Profit strategies
It is a combination of sources of profit in compatible proportions. Sources of profits in
general are diverse offerings, economies of scale, innovation, quality assurance, permanent cost

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reduction and productive flexibility. Each of the profit strategies need to satisfy certain
requirements of executives, banks, shareholders, labour unions, employees, suppliers etc.
Volume and diversity strategy
It governs the production of a diverse range of vehicles. However, this is possible only if
there are not kept any huge social and economic differentiation among the several social
categories. The strategy needs a moderately hierarchical market and also a polyvalent, plentiful
and promotable workforce.
Luxury car making strategies
Very few reputed care makers in Germany are specialised with offering the luxury cars.
Such cars are targeted to customers who pay high prices just to show their social status. These
customers seek the quality products; however, quality for them is not just limited to quality specs
but it goes much above than this. They actually want the attractive designs, so that, their social
status gets verbal with the very first view on the car. However, this is a much more difficult
strategy as customer preferences gets change quite rapidly. It also varies a lot depending on the
geographic location.
Flexible and innovation strategy
It is about a massive production of cars meeting the emerging trends and a quick
shuffling between changes of demands. This requires a highly capable forecast capability.
Entry strategy
There are quite a few types of entry strategy like Multidomestic Strategy, Global Strategy
and Translational Strategy. Translational strategy will be the suggested strategy for Toyota as it

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governs a balanced path between the other two types of entry strategy. Translational strategy
means acquiring the efficiency while also fiddling with the local preferences.
Conclusion
In summary, doing business in Europe is full of opportunities and the challenges.
Germany was found as the most suitable country to enter for Toyota. However, it is mandatory
for Toyota to understand and follow the policies attached with the running and setting of
production and distribution facilities. It is also important that Toyota follows the translational
strategy to enter and operate in the German automotive industry.

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