Business, Management

Toyota PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Edward Ferguson
Toyota Motor Corporation PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external factors case study
A Toyota Vellfire VL. Toyota’s PESTEL/PESTLE analysis of external factors indicates major opportunities and a few threats in the company’s remote or macro-environment. (Photo: Public Domain)

Toyota Motor Corporation’s opportunities and threats are identified in this PESTEL/PESTLE analysis. With more than 300,000 employees, Toyota is a leading player in the global automotive industry. However, the company must exploit opportunities and address threats in its remote or macro-environment, as shown in this PESTEL/PESTLE analysis. Various external factors influence Toyota and the global automotive industry. With these factors in mind, the firm’s executives must develop strategies and programs to support business growth and stability. Toyota can maintain its position as a leading global firm by effectively addressing the concerns highlighted in this PESTEL/PESTLE analysis.

Toyota must address various opportunities and threats identified in this PESTEL/PESTLE analysis to ensure the company’s continued dominance in the global automobile market.

Political Factors Affecting Toyota’s Business

Toyota is subject to the effects of political conditions. This dimension of the PESTEL/PESTLE analysis model 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:

  1. Political stability in most major markets (opportunity)
  2. Free trade agreements (opportunity)
  3. Governmental support for ecofriendly products (opportunity)

The political stability of major markets is an opportunity for Toyota to grow with minimal political tension. Also, free trade agreements involving Japan and other countries where Toyota operates present opportunities for improved market penetration. In addition, governmental support for ecofriendly products is an opportunity for the company to improve its products to satisfy or exceed environmental expectations. In this dimension of Toyota’s PESTEL/PESTLE analysis, the main political external factors provide opportunities for the business.

Economic Factors Important to Toyota

Economic trends influence Toyota’s organizational development. This dimension of the PESTEL/PESTLE analysis model determines the effects of economic situations or changes on business. In Toyota’s case, the most significant economic external factors in the remote or macro-environment are as follows:

  1. Weaker Yen vs. U.S. Dollar (opportunity)
  2. Gradual growth of U.S. economy (opportunity)
  3. Rapid growth of developing countries (opportunity)

Toyota has the opportunity to improve its exports from Japan based on the weakness of the Japanese Yen. Also, Toyota has the opportunity to grow its business in the U.S., which is the firm’s second biggest market after Japan. In addition, the rapid growth of developing economies present the opportunity for the firm to improve revenues based on these markets. In this dimension of Toyota’s PESTEL/PESTLE analysis, the main economic external factors create opportunities for business growth.

Social/Sociocultural Factors Influencing Toyota’s Business Environment

Toyota experiences the effects of social or sociocultural factors. This dimension of the PESTEL/PESTLE analysis model pertains to the impact of sociocultural trends on business. In Toyota’s case, the following are the main social/sociocultural external factors in the firm’s remote or macro-environment:

  1. Increasing interest in hybrid cars (opportunity)
  2. Increasing interest in electric cars (opportunity)
  3. Widening wealth gap (threat)

Toyota has the opportunity to provide more products that satisfy customers’ increasing interest in hybrid and electric vehicles. However, the company must consider the widening wealth gap, which is a threat because it corresponds to a declining middle class. The middle class is the main revenue source of Toyota. In this dimension of Toyota’s PESTEL/PESTLE analysis, the social external factor of the widening wealth gap is a major concern.

Technological Factors in Toyota’s Business

Technological factors impact Toyota, especially because it is a technological business. This dimension of the PESTEL/PESTLE analysis model determines the influence of technologies or technological trends. In Toyota’s case, the following are the most notable technological external factors in the company’s remote or macro-environment:

  1. Rising use of e-commerce (opportunity)
  2. Mobile technology trend (opportunity)
  3. Cybercrime (threat)

Toyota has the opportunity to improve its e-commerce capabilities or to exploit third-party e-commerce service providers for sales of some of its products, such as spare parts. Also, Toyota has the opportunity to enhance its mobile apps to increase customer engagement and loyalty. However, the company must address the threat of cybercrime, including corporate cyber-espionage. This dimension of Toyota’s PESTEL/PESTLE analysis model shows major technological opportunities, although the firm must address the threat of cybercrime through suitable technological security measures.

Ecological/Environmental Factors

Toyota needs to include ecological concerns in its strategic decision-making. This dimension of the PESTEL/PESTLE analysis model 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:

  1. Climate change (opportunity)
  2. Declining global oil reserves (opportunity)
  3. Increasing emphasis on business sustainability (opportunity)

Toyota has opportunities to provide more environmentally 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 Toyota’s PESTEL/PESTLE analysis, the major ecological/environmental factors present opportunities that the firm can use for further growth.

Legal Factors

Legal systems impact Toyota’s business. This dimension of the PESTEL/PESTLE analysis model determines the laws and regulations that affect business. In Toyota’s case, the following are the most significant legal external factors in the remote or macro-environment:

  1. Improving intellectual property laws (opportunity)
  2. Increasingly complex environmental laws (opportunity)
  3. 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. Toyota also has the opportunity to provide higher quality products 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. This dimension of Toyota’s PESTEL/PESTLE analysis model shows that the legal external factors present major opportunities for the firm.

Toyota’s PESTEL/PESTLE Analysis – Recommendations

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. Toyota can also improve business operations and market presence to exploit opportunities based on economic external factors. However, Toyota must address threats based on the external factors of the widening wealth gap and the rising frequency of cybercrime. Technological measures and product innovation could prove beneficial in this endeavor. Thus, this PESTEL/PESTLE analysis shows that Toyota has significant opportunities for growth and stability.

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