Toyota Motor Corporation’s opportunities and threats are identified in this PESTEL/PESTLE analysis. The automotive industry is subject to a variety of political, economic, social, technological, ecological, and legal factors (the PESTEL factors). Toyota’s business performance depends on how well it addresses these external factors. The external factors also represent trends that come with changes in the market for cars and related products. Toyota needs to adjust its strategies to address the PESTLE factors, accordingly. Doing so optimizes the company’s chances of outperforming competitors and achieving a strong business position for long-term success in the automotive industry.
Effectively addressing the concerns highlighted in this PESTEL/PESTLE analysis supports the achievement of strategic goals based on Toyota’s corporate vision and mission statements. These goals relate to the opportunities and threats in the business environment. Strategic fit and higher chances of success are achieved by matching Toyota’s competencies to the external factors identified in this PESTEL analysis. The company also benefits from aligning its products to the trends shown in this PESTLE analysis, such as the economic and social trends that influence customers and market demand for automobiles.
Political Factors Affecting Toyota’s Business
The automotive company is subject to the effects of political conditions. This dimension of the PESTEL analysis identifies the impacts of government on firms and industries. In Toyota’s case, the following are the significant political external factors in the remote or macro-environment:
- Political stability in most major markets (opportunity)
- Free-trade agreements (opportunity)
- Governmental support for eco-friendly products (opportunity)
The political stability of major markets is an opportunity for Toyota to grow with minimal political tension. Also, free-trade agreements involving countries where the company operates present opportunities for improved market penetration. This PESTLE analysis identifies governmental support for ecofriendly products as an opportunity for the company to improve its vehicles to satisfy or exceed environment-focused standards. Thus, business growth opportunities are available, based on the political external factors in this PESTLE analysis of Toyota.
Economic trends influence the organizational development of the automotive firm. This dimension of the PESTEL analysis determines the effects of economic situations or changes on business. In Toyota’s case, the most significant economic external factors in the industry environment are as follows:
- Weak Yen vs. U.S. Dollar (opportunity)
- Growth of the U.S. economy (opportunity)
- Rapid growth of developing countries (opportunity)
Toyota has the opportunity to improve its exports from Japan based on the weakness of the Japanese Yen. This PESTLE analysis also points to the company’s opportunity to grow its business in the U.S., which is one of the world’s biggest automobile markets. In addition, the rapid growth of developing economies presents the opportunity for the firm to improve revenues based on these markets. In this dimension of the PESTLE analysis, the main economic external factors create opportunities for automotive business growth. Toyota’s generic competitive strategy and intensive growth strategies can focus on business growth based on these economic factors.
Social/Sociocultural Factors Influencing Toyota’s Business Environment
This dimension of the PESTEL analysis pertains to the impact of sociocultural trends on the automaker’s customers and their buying behaviors. The following are the social/sociocultural external factors in Toyota’s remote/macro-environment:
- Increasing interest in hybrid cars (opportunity)
- Increasing interest in electric cars (opportunity)
- Widening wealth gap (threat)
Toyota has the opportunity to provide more products that satisfy customers’ increasing interest in hybrid and electric vehicles. However, in this dimension of the PESTLE analysis, the widening wealth gap equates to a possible decline in demand for cars in some market segments. Toyota’s organizational culture encourages employees’ awareness of the social situation of the industry environment. This aspect of the company supports competitiveness by informing strategic decisions pertaining to the factors in this dimension of the PESTEL analysis. Also, Toyota’s marketing mix (4P) keeps adapting to the social situation to effectively appeal to target customers. Social factors affect the success of the automotive company’s marketing strategies.
Technological Factors in Toyota’s Business
This dimension of the PESTEL analysis determines the influence of technologies or technological trends on the automotive business. The following are the technological external factors in Toyota’s industry environment:
- Continuing increase in e-commerce applications (opportunity)
- Increasing use and dependence on mobile technology (opportunity)
- Cybercrime (threat)
Toyota has the opportunity to improve its e-commerce capabilities or to exploit third-party e-commerce service providers to sell some of its products, such as spare parts and accessories. Also, this PESTEL analysis points to the company’s opportunity to enhance its mobile apps and related services to increase customer engagement and loyalty, which can strengthen the brand image and the likelihood of car sales. However, the company must address the threat of cybercrime, including corporate cyber-espionage. This dimension of the PESTLE analysis of Toyota shows major technological opportunities, although the firm must address the threat of cybercrime through suitable technological security measures. The issues in this dimension of the PESTEL analysis of the automotive business require technological capabilities linked to the business strengths described in the SWOT analysis of Toyota. The company’s business processes are designed to meet technological challenges. Toyota’s operations management involves technological resources and technology-focused innovation to take advantage of the opportunities in this dimension of the PESTLE analysis.
Toyota includes ecological concerns in its strategic decision-making. This dimension of the PESTEL analysis identifies concerns regarding the natural environment in relation to business. In Toyota’s case, the major ecological/environmental external factors in the remote or macro-environment are as follows:
- Climate change (opportunity)
- Declining global oil reserves (opportunity)
- Increasing emphasis on business sustainability (opportunity)
Toyota has opportunities to provide more environment-friendly products, such as electric cars or cars with higher fuel efficiency. The company also has the opportunity to increase its sustainability performance through improvements in business process efficiency. In this dimension of the PESTLE analysis, the major ecological/environmental factors present opportunities that the automaker can use for further growth. Toyota’s corporate social responsibility strategy deals with ecological concerns. This strategy creates opportunities for the company to improve its brand image while making its automobiles more competitive. However, to address the external factors described in this PESTEL analysis, similar corporate citizenship strategies are used in the operations of competitors, like Tesla, General Motors, Ford, and Honda. Thus, in terms of the factors in this dimension of the PESTEL analysis, firms’ strategies compete, adding to the strong pressure of competition described in the Five Forces analysis of Toyota.
Legal systems impact the automotive company’s business limits, requirements, and options. This dimension of the PESTEL analysis determines the laws and regulations that affect business. In Toyota’s case, the following are the most significant legal external factors in the industry environment:
- Improving intellectual property laws (opportunity)
- Increasingly complex environmental laws (opportunity)
- Increasingly complex consumer laws (opportunity)
Toyota has the opportunity to grow with reduced concerns for infringement of its intellectual property rights because governments are working toward improving intellectual property protection. This PESTLE analysis also shows the company’s opportunity to provide higher-quality cars that satisfy or exceed requirements based on environmental laws. In addition, the company can exploit the opportunity of offering safer and more satisfactory products to fulfill or exceed consumer laws. Thus, in this dimension of the PESTLE analysis, Toyota has opportunities based on legal external factors.
Strategic Points – PESTLE/PESTEL Analysis of Toyota
The external factors identified in this PESTEL/PESTLE analysis of Toyota’s remote or macro-environment mostly create opportunities for the company. For instance, the firm can focus on product development to exploit opportunities in the market. The automaker can also improve business operations and market presence to exploit opportunities based on the economic external factors in this PESTLE analysis. However, Toyota must address threats linked to the widening wealth gap and the rising frequency of cybercrime. Technological measures and product innovation are beneficial in this endeavor. Thus, this PESTEL analysis of Toyota shows significant opportunities for growth and stability despite the identified threats.
- Phan, S. (2021). The effect of PESTLE factors on development of e-commerce. International Journal of Data and Network Science, 5(1), 37-42.
- Toyota Motor Corporation – Form 20-F.
- Toyota Motor Corporation – Governance.
- Toyota Motor Corporation – Sustainability.
- U.S. Department of Commerce – International Trade Administration – Automotive Industry.