Doing Business in Europe: Toyota's Strategy in the Auto Industry

This report provides a comprehensive analysis of the European business environment, specifically focusing on the automobile industry and Toyota's potential market entry. It examines the opportunities and challenges of doing business in Europe, with a comparative study of Germany, Sweden, and Finland to determine the most suitable location for Toyota's manufacturing and distribution facilities. The report includes a PESTLE analysis and Porter's Five Forces analysis for each country, culminating in the recommendation of Germany as the optimal market. Furthermore, it outlines key factors for setting up production and distribution facilities and suggests a business strategy for successful operation in the EU market, emphasizing the importance of adapting to the European business environment and leveraging the opportunities presented by the single market.

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