PESTLE Analysis of Toyota: External Forces and Strategies

This report presents a comprehensive PESTLE analysis of Toyota, a leading automotive manufacturer. It examines the political, economic, social, technological, environmental, and legal factors impacting Toyota's operations and strategic decisions. The analysis identifies technological factors as the most significant external force, emphasizing the importance of innovation and adaptation to maintain competitiveness. The report explores how Toyota's policies address these external pressures, particularly through its research and development efforts, market analysis, and employee training programs. Furthermore, it discusses how managers prioritize the various factors identified in the PESTLE analysis, focusing on the impact on profitability and consumer demand. The report concludes by highlighting the importance of environmental scanning and strategic planning for Toyota's continued success in a dynamic business environment, ensuring customer satisfaction and achievement of corporate objectives.

Car Company Toyota

Table of Contents
INTRODUCTION...........................................................................................................................3
Pestle Analysis of Toyota.......................................................................................................3
External force having most implication on Toyota................................................................3
Extent to which organisations policy takes into account these forces....................................4
Ways in which managers prioritise various factors of Pestle Analysis..................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................5

INTRODUCTION
External environment of every organisation refers to various factors in the environment
which are affecting the working of an organisation directly or indirectly. In order to conduct
analysis of external environment pestle analysis is done on various organisations. In the
following report Toyota motor Corp which is a Japanese multinational company dealing with
automotive manufacturer is considered (Arya, S. and et. al., 2020). A pestle analysis on the
organisation is conducted and various factors which are affecting the organisation enormously
are discussed in the following report effectively.
Pestle Analysis of Toyota
Political factors: Toyota needs to take care of various political factors as it deals with a
number of countries. These include decreasing customer necessity, increase in investments and
concentration of developed and developing economies. The increase in oil prices and oil crisis is
also resulting in demand of hybrid cars.
Economic factors: Rising cost of energy, competitive market, and more demanding
customers in an economy are the economic factors affecting Toyota. Other than this company is
also affected by various fluctuations in foreign exchange rates, interest rates, gross domestic
product, spending power of consumer also affect Toyota.
Social factors: It is necessary for Toyota to manage their image in the market. Also use of
energy sources by Toyota is resulting in a positive social impact and positive media relations as
well. It is necessary for company to critically analyse buying behaviour of customers and
continuously changing needs.
Technological factors: Toyota invests heavily on sustainable and environmental
improvement projects. Company is continuously adopting methods to bring in new technologies
such as hybrid cars, fuel cell vehicles and so on. In this way technological changes in
environment of ana organisation effects Toyota (Cusumano, M.A., 2020).
Legal factors: As Toyota has presence in a number of countries it requires to fulfil the
laws and legislations of all these countries. These include trade taxes, various environmental and
labour related laws. If company fails to do so it might face legal proceeding which results in
heavy losses for company.

Environmental factors: These includes the importance an organisation has to pay towards
various environmental factors such a s extraction of resources and release of pollutants in the
nature. In order to manage this Toyota invests in sustainable development methods. It is
necessary for Toyota to do this in order to build brand image as well.
External force having most implication on Toyota
According to the analysis done it is seen that technological factors are the external factors
which are mostly impacting Toyota. This is because overall business of Toyota is revolving
around the technologies which it provides in its product to the customer (Wada, K., 2020). It is
often seen that there are a number of technologies and innovations coming out in the
environment. It is necessary for Toyota to make sure that they are adopting all these technologies
so that they can fulfil the requirements of their customers. There are a number of competitors
present for Toyota in the automobile sector. All these competitors bring in various innovations in
their products from time to time in order to stay in competition the same is required by Toyota
also. Along with bringing in technology in the company Toyota requires huge investment for
such factors. Technologies are very costly and expensive. Also, when new technologies are
brought in the organisation it is required to have highly skilled and experienced employs to work
with those technologies. In order to do so Toyota requires to train their employs effectively so
that they can work with these technologies. The training of employs also requires formulation of
different human resource policies by the company. They need to create numerical flexibility as
well as functional flexibility in their organisation to support their employs. Thus, it can be said
that technological factor has the maximum impact on Toyota because Toyota has almost been a
pioneer in technological field in automotive industry. In order to continue its legacy and remain
in the competition it is required by Toyota to effectively bring in new technologies and
innovations in their organisation from time to time.
Extent to which organisations policy takes into account these forces
It is very necessary by the management of organisation to take into account these forces
which have major implications on business of Toyota (Orecchini, F., Santiangeli, A. and Zuccari,
F., 2020). Other than technological factors social factors also have various impact on the
business. In order to take care of these factors it is required by management of the organisation to
create strategies so that organisational policies can be flexible enough to adopt the changes in
these factors.

In order to deal with technological changes in the organisation Toyota keep highly
advanced research and development department. This department majorly focuses on
development of new techniques and technologies for the organisation so that they can compete in
technological sector with other organisations. It is also required by organisation to invest a lot in
these activities. Therefore, the financial department of Toyota key points available for innovation
of new technologies and capital required for buying new machinery and equipment. It is also
required to train employees according to these new technologies. In order to do so proper
training and development program are set up by human resources in the organisation to train the
employees.
In order to deal with social changes in the environment it is necessary that marketing
department of Toyota conducts proper analysis of market (Wang, W. and et. al., 2020). With the
help of proper analysis of market, the company can easily understand the requirements and
demands of their customers and produce goods accordingly. The changes in the taste and
preferences of customers are dynamic. There for it is required by marketing department to
continuously analyse the market to understand fast changing effects of behaviour of a consumer.
In this way organisational policies in Toyota take into account these forces which have major
impact on functioning of Toyota.
Ways in which managers prioritise various factors of Pestle Analysis
It is often difficult for managers in an organisation to prioritise various factors which
impact the organisation. However, in order to do so the managers list down various positive and
negative impacts of different factors. When a factor is having major positive impact on the
organisation then they can be looked over (Aita, A., 2020). And the factors which are having
maximum negative impact on the organisation are to be taken care of. The value of Pestle
analysis cannot be discriminated as it helps in identifying various impact of different factors.
After this it is the judgement of the managers in an organisation on which factor they need to put
major focus on.
Taking examples from Toyota it can be seen that manages majorly focuses on
technological factors. The major reasons behind this is that most of the investment of company is
required for bringing in new innovations. Therefore in order to make sure that these investments
are bringing out returns for the company it is necessary for managers of Toyota to focus on this
factor.

Also seen that major focus is paid on the demand of consumers. If the company produces
something that is not required by the consumers then all the efforts of Toyota are of no use.
Therefore it is necessary for company to focus on social factors. The managers in an organisation
are required to judge the various factors influencing business and rank them according to their
impact on profits and productivity of business (Kishi, A. and et. al., 2020).
CONCLUSION
With the help of the following report it can be concluded that it is important for
organisations to conduct and proper analysis of external environment so that all the opportunities
and threats from external environment can be faced well by an organisation. The following
report also concludes the importance of technological advancement for Toyota. The managers at
Toyota and majorly focusing on various technological advancement they can bring in their
products in order to make sure that their customers are always satisfied. This helps them in
fulfilling all the customer requirements and obtaining all their goals and objectives efficiently.

REFERENCES
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Wada, K., 2020. Findings of Two Toyota Executives. In the Evolution of the Toyota Production
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Orecchini, F., Santiangeli, A. and Zuccari, F., 2020. Hybrid-electric system truth test: Energy
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wholesales and post production options (Doctoral dissertation).
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