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David answered on Dec 21 2021
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Report – Toyota in China
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Table of contents
1. Introduction……………………………………………………………………………..3
2. About the company ……………………………………………………………………..3
3. Industry analysis ………………………………………………………………………...4
4. External environment analysis: PESTEL analysis ……………………………………...5
5. Competitive analysis of Toyota: Porter five forces model………………………………7
6. Impact of external environment factors on the organisation’s business strategy……………..9
6.1 Key influences on an organisations available strategy options…………………………9
7. Generating and evaluating strategic options……………………………………………10
7.1 Ansoff matrix ………………………………………………………………………..11
7.2 Evaluation and choice of strategic option for the company………………………..12
8. Conclusion…………………………………………………………………………..12
References………………………………………………………………………………14
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1. Introduction
With faster transportation and communication, the world is shrinking day by day. With
globalization companies are spreading their customer base and penetrating through the untapped
markets. To succeed in setting up international business, the companies conduct external
environment analysis and develop several global marketing strategies to suit their business needs
and respond to the environmental factors prevailing in the particular country. For the purpose of
the assignment, let us consider the company in concern is Toyota. The report is written with an
objective of conducting a thorough strategic analysis of Toyota’s external environment and
critically evaluates how the identified issues might impact on the organisation’s business strategy.
The country chosen for the purpose of analysis is China. Growth of automobile industry,
increasing competition, shrinking of market share in internal markets made it compulsory for
Toyota to expand. In order to meet the overhead costs the company needs to sale more, borrow
more, manufacture more and expand or else it would perish. Hence it has to sell abroad. To be
competitive in the foreign market, the company needs to set up factories there, take advantage of
the local tariffs and regulations and exploit the low cost labour in the foreign country. This
assignment would assess the different external environmental factors - the cultural, political, and
legal environments of China - that affect international business of the company. To evaluate the
competitive environment for Toyota using Porter’s five forces model. TOWS analysis is
conducted to evaluate the external environment in relation to the internal environment. Impact of
external environment factors on the organization’s business strategy is assessed. Thereon it moves
on to generating and evaluates the strategies of Toyota.
2. About the company
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Toyota is a multinational Japanese organization. It has more than 300000 employees all
over the world and is consistently ranked among the top five car makers in the world. Toyota
Motor Corporation was founded in the year 1937 by Kiichiro Toyoda as an expansion plan to
manufacture cars from his father’s original company Toyota Industries (About the company
n.d.). Toyota Motor Company is part of the Toyota Group which is one of the largest
conglomerates in the world. Its headquarters are in Toyota City, Aichi, formerly known as
Koromo. Toyota Motor Corporation also includes other group companies such as Lexus, Hino
Motors and Daihatsu. From very humble beginnings, Toyota grew to become one of the largest
car manufacturers in the world and entered USA in the year 1957. Initially the response was
lukewarm and the rise in import taxes in USA made Toyota rethink its strategies. It went on to
build manufacturing plants in the USA along with a number of international players such as
Nissan and Honda to lower its manufacturing costs (About the company n.d.). It now has
manufacturing plants in a number of countries such as USA, Japan, India, U.K., France, Brazil
and Argentina among many more. Toyota has given the world a number of successful car brands,
such as the Land Cruiser, Highlander, Tundra range of trucks, Corolla, Camry and Prius (About
the company n.d.).
3. Industry analysis
The automobile industry in China is a rapidly growing industry. It is the world’s largest
producer of automobiles since the year 2008. There are a number of companies jostling for a
bigger part of market share in China. Many of these companies are local companies such as
Hafei, Geely and Chery. These local companies provide for more than half of the total
automobiles produced in China (IBM Business Consulting Services 2005). The rest are
manufactured in joint ventures with foreign makers such as Volkswagen, GM, Hyundai, Nissan,
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Honda and Toyota among others. Though most of the automobiles produced in China are for
local sales, however exports in the recent past have gone up. The industry in itself, through its
laws, practices and norms provides a competitive advantage and incentivizes automobile
makers, making China a favored nation in comparison to others, for a number of multinational
companies (IBM Business Consulting Services 2005).
China’s automobile industry has developed rapidly since the 1990’s and after China’s
entrance in the World Trade Organization it has grown at an even more rapid pace. China’s
technological advancement, cheap manpower and an investor friendly environment has helped it
in becoming the largest producer of automobiles. It also helps the foreign companies expand as
they set up operations in the world’s largest market place as the domestic demand is also
increasing exponentially. Since China joined the World Trade Organization it has made amends
to its import tariffs making it a more favorable nation for a lot of foreign companies to do
business with. Import taxes for whole vehicles have been slashed down to 25% from 80%,
whereas component import taxes have been brought down to 10% from 15% (IBM Business
Consulting Services 2005).
Presently the company is in maturity stage. China is also taking big steps in promoting
alternate energy automobiles by subsidizing the costs and incentivizing such automobile makers.
The Energy Saving and the New Energy Vehicle Devolvement Plan are two such policies which
will stimulate the growth of energy efficient automobiles in the near future (Harner 2011).
4. External environment analysis: PESTEL analysis
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The macro economic factors influencing competitiveness of international business
environment are explained by an analysis of political, legal, social, and cultural factors
influencing the company.
- Political environment
The political environment of a country is evaluated by analysing the nature and
competence of the government. China is a socialist state. It is a communist country. Chinese
communist parties and eight other smaller parties from the political form the base of the country.
The philosophy of Chinese politics is that resources should be owned and shared by people for
social...