Business Strategy: Impact of Macro and Internal Environment on Toyota

This report analyzes the impact of macro and internal environment on the business operations and strategies of Toyota. It includes a PESTLE analysis for the macro environment and a McKinsey7S model for the internal environment. The report also evaluates the strengths and weaknesses of Toyota's internal capabilities, structure, and skill set.

Business strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1/M1 Define appropriate framework for identifying the macro environment impact on the
business and also critically analyse the macro environment.......................................................1
TASK 2............................................................................................................................................3
P2 Analyse the internal environment and capabilities of an organisation .................................3
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set..........................................................5
.........................................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business strategy refers to the direction and set of actions which helps an organisation to
accomplish their activities effectively. Also, strategic planning can be understand as a process in
which an organisation manage their organisational resources in order to complete their goals and
objectives. In this report the taken organisation is Toyota which is a manufacture of motor car,
established in 1989. This file will tell about all the internal and external factors which can impact
on the business operations and strategies. For analysing all the factors an organisation can use
various method like PESTLE, Porter five forces, etc. In this file for analysing the external
environment will use PESTLE analysis and for internal analysis will use McKinsey7S model.
TASK 1
P1/M1 Define appropriate framework for identifying the macro environment impact on the
business and also critically analyse the macro environment
It is essential for any organisation to evaluate their macro or external environment in
order to operate their activities smoothly(Teece, 2012). For analysing the impact of external
environment on the business Toyota can use PESTLE analysis which will help them to identify
the both positive and negative impact of the environmental factors on the business. The PESTLE
analysis of Toyota described below:
Political factors: These factors are related to the government policies, political trends,
trading policies and many others which have directly impact on the profitability and
sustainability of the business. These factors have both the positive and negative impact on the
company which are as follow:
Positive: If the government of UK permits the free trade between the states then Toyota
will be able to dealing across the world which results higher sales and success of the company.
Negative: Other, if the government impose a new tax or duty then it will directly impact
on the revenue and income of the business.
Economic Factors: In this, Toyota will focus on the all the external economic factors
includes exchange rates, inflation rate, demand and supply effects etc. These factors have long
term effect on the company's performance and profitability(Håkansson and Snehota, 2014). The
both positive and negative impact of these factors are described below:
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Positive: In the UK generally the rate of taxes are not high which will help the Toyota to
save their extra expenses and increase their income.
Negative: In the case if in the UK inflation rate increase then it will affect the companies
products and also it will affect the purchasing power of the customers in a badly manner.
Social factors: These factors are related to the customers belief, attitude, cultural trends
and many others which have directly related to the society in the business is operating their
activities(Brandenburger and Stuart, 2015). These factors have also both positive and negative
effect on the company which are defined below:
Positive effect: In the state, where the people are giving preference to purchase hybrid
cars will provide huge benefit to the Toyota.
Negative effect: As Toyota is leading their activities globally so they have to face
different countries culture, in the case if they are not able to follow their culture trends then they
will be not able to enhance their performance.
Technological factors: It refers to the innovation in technology, information and
communication, research and development etc. which will affect on the company operations in
an effective manner. Although they are very beneficial for the company but it has also some
negative effect which are defined below:
Positive effect: After more innovation in technology Toyota can take advantage of rising
trend of E-commerce as it will help to introduce more people from their products.
Negative impact: Technological factors have increase the competition in the market as it
increase the online trading opportunity for every business.
Legal factors: In this element, those factors are included which are related to the
employment law, consumer law, labour law etc. These factors directly impact on the customers
mind, belief, and overall performance of the company. These factors have both positive and
negative impact which are as follow:
Positive effect: If the Toyota will follow the consumer law in the proper manner that they
will be able to attain customers belief and also able to increase their brand value(Schwartz and
Davis, 2012).
Negative effect: In the case of implementation of employment law in the Toyota then the
expenses of the company will increase. For instance, they have to do more activities for security
and safety of the employees.
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Environmental factors: In this term, those factors are including which are arising
because of surroundings of the environment. These factors includes weather, climate, global
changes etc.(Simons, 2013). Here are defined about the both the positive and negative impact on
the company:
Positive effect: If the Toyota will consider these factors in their production then they will
be able to motivates the employees and minimize the wastage.
Negative effect: It also have negative impact on the company operation. For example if
the company is not contributing in the CSR activities then they will not be able to attract
customers towards their products and services.
TASK 2
P2 Analyse the internal environment and capabilities of an organisation
For succeeding in the market it is essential for Toyota to eventuate the internal
environment of the business for accomplishing their work more effectively and efficiently. It is
important for them to determine the impact of all the internal environmental factors on the
business. For analysing all the internal factors they can McKinsey7S model which contains seven
factors within which are described below:
Hard elements:
 Strategy: It is refers to that plans and actions of the company which are developing by
an organisation to attain competitive advantage and become successful. For succeeding in
the market and attain more growth Toyota following the generic strategy and intensive
growth strategies in their business operations. These strategies helps them to represent the
overall activities and also helps them to define the different type of actions for attaining
the more growth and success.
 Structure: This represent that how an organisation is divided in the various departments
and how they are organised in order to achieve their goals and objectives in an effective
manner. For operating their activities effectively Toyota is following flat structure in their
organisation as it will help them to maintain a proper communication with their
employees and help to create healthy environment in the organisation which helps them
to motivates their employees in the right direction(Figge, et. al., 2015).
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 Systems: This system involves all the procedure which has to be followed by an
organisation so that they can show their regular activities and tell about the decision
making process. In the Toyota company they are following Toyota production system in
which they are focussing on the manufacturing process also they are try to maintain an
effective relationship with supplier and customers. Moreover, this system helps them to
minimize cost and eliminate wastage which results higher cash flow and
sales(Bharadwaj, et. al., 2013).
Soft Elements:
 Shared values: This refers to the overall culture of the company and tell about the
purpose of each activity. This element tells about all the norms and standard which are
followed by an organisation in order to influence their employees behaviour and
company actions. Toyota is following organisational culture in their organisation as it
helps them to motivates their employees to do work as a team, delivering quality and
adopt continuous improvement in their activities also they are motivating their
employees to do work in the ethical manner.
 Style: This element shows that how the organisation is manage by their top level
managers, how they are interacting with their subordinates, and which actions they are
adopting to operate their activities effectively. An organisation needs to adopt that
leadership style which is suitable according to their organisational culture and needs of
them. As Toyota is adopting democratic leadership style in their business, in which the
managers are includes all the employees in their decision making process. Due to which
employees feel like they are the important asset of the organisation then they will
support in implement new changes and increase productivity of the organisation.
 Staff: This element tells about that in the organisation current employees are sufficient
for accomplishing the goals or not or they need more employees. Also it define about the
process of recruiting, training and motivating. In relation to Toyota they have almost
364000 employees in the world and they are adopting online process method for recruit
the employees in the organisation.
 Skills: It refers to the abilities or competency of the employees in order to accomplish
the organisational goals and objectives(Anderson and Zeithaml, 2017). In order to
achieve the objectives Toyota must recruit skilled and talented employees so they will be
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able to except new challenges and new strategies which is required to implement in the
organisation. They must recruit those candidates who have proper communication skills,
technical skills, and sale and marketing skills so they will be able to interact with
customers in a proper manner and helps the organisation to achieve its goals and
objectives(Zahra and Covin, 2019).
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set
In order to achieve the organisational goals and objectives effectively and timely an
organisation needs to analysis internal factors of the organisation. By determining all the internal
environmental factors a business can find all the capabilities, staff, structure, etc. which will help
them to implement all the necessary changes in order to enhance the overall performance of the
company. Also, it will help them to make decisions related to the increases the strength of their
employees and reduce the weakness of them so they will be able to contribute their efforts in
order to increase the productivity and sales of the company. Other than that, the tool of internal
environment like Mckinsey7S model only helps an organisation to evaluate their internal factors
not external factors which is major problem of this analytical tool. For accomplishing their goals
and get succeed in the market Toyota needs to proper evaluation of both the external and interal
environment of the organisation.
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CONCLUSION
From the above report, it can be concluded that for succeeding in the marketplace an
organisation needs to formulate effective strategies in order to accomplish their organisational
goals and objectives. As by above defined the PESTEL analysis and McKinsey7s model an
organisation can analyse the impact of the external and internal environment on the overall
performance of the business. Also, understand that how these tools helps them to determine the
effective strategies in order to accomplish their organisational goals and increase the brand value.
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REFERENCES
Books & Journal
Anderson, C. R. and Zeithaml, C. P., 2017. Stage of the product life cycle, business strategy, and
business performance. Academy of Management journal. 27(1). pp.5-24.
Arthur, J. B., 2015. The link between business strategy and industrial relations systems in
American steel minimills. ILR Review. 45(3). pp.488-506
Bharadwaj, A., et. al., 2013. Digital business strategy: toward a next generation of insights. MIS
quarterly. pp.471-482.
Brandenburger, A. M. and Stuart Jr, H. W., 2015. Value‐based business strategy. Journal of
economics & management strategy. 5(1). pp.5-24.
Figge, F., et. al., 2015. The sustainability balanced scorecard–linking sustainability management
to business strategy. Business strategy and the Environment. 11(5). pp.269-284.
Håkansson, H. and Snehota, I., 2014. No business is an island: The network concept of business
strategy. Scandinavian journal of management. 5(3). pp.187-200.
Schwartz, H. and Davis, S. M., 2012. Matching corporate culture and business strategy.
Organizational dynamics. 10(1). pp.30-48.
Shapiro, C., 2012. The theory of business strategy. The Rand journal of economics. 20(1).
pp.125-137.
Simons, R., 2013. Accounting control systems and business strategy: an empirical analysis.
Accounting, organizations and society. 12(4). pp.357-374.
Teece, D. J., 2012. Business models, business strategy and innovation. Long range planning.
43(2-3). pp.172-194.
Zahra, S. A. and Covin, J. G., 2019. Business strategy, technology policy and firm performance.
Strategic management journal. 14(6). pp.451-478.
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