Detailed PESTEL Analysis of Toyota
Toyota experiences the effects of social or sociocultural factors. EdrawMax’s PESTEL Analysis will provide a framework for investigating the external environment for Toyota's Global business.
1. Lead-in
If the question that is bothering you is what is PESTEL (analysis), one should look for the answer among the concepts of marketing principles. PESTEL analysis is a marketing tool that many companies use to evaluate the environment where the firms carry out their business operations. Management uses a PESTEL when the company launches a new product, project, or other service to gauge the future of the endeavor. PESTEL is the short form for the Political, Economic, Technological, Environmental, and Legal factors. Your understanding of the PESTEL analysis requires your knowledge about PESTEL analysis used to evaluate the market for a trade or an organizational unit.
Toyota is a multinational company of automotive manufacturing with its roots in Japan. Toyota is one of the top automobile manufacturing companies. Each year they manufacture almost 10 million vehicles. It is also the largest vehicle seller after Volkswagen. This article here carries out a detailed PESTEL analysis of Toyota and understands the company's macro-environmental factors that influence the business functioning of the company.
2. About Toyota
2.1 Introduction of Toyota
Toyota is a Japanese multinational company established in 1937 by Kiichiro Toyoda. It is an automotive manufacturer headquartered in Toyota city, Aichi, Japan. They were originally founded as an exploding car manufacturing organization. It is currently one of the leading automobile manufacturers in the world.
It produces around 10 million vehicles each year. Moreover, it is considered one of the most successful ventures. It is a global brand that operates in over 170 countries worldwide. A PESTEL analysis of the automobile business operations will tell you about the suitable environment required to build a successful business such as Toyota. By studying the brand through the PESTEL analysis of Toyota, we will get to know the aspects of the company's working environment that have contributed to its massive success.
2.2 Overview of Toyota
| Company Name: | Toyota Motors Corporation |
| CEO: | Akio Toyoda, since 2009 |
| Company Type: | Automotive manufacturing company |
| Year Founded: | 1937 |
| Employees: | 364,445 people, approx. |
| Annual Revenue: | $276.57 billion, in the year 2021 |
| Founder: | Kiichiro Toyoda |
| Area Served: | Worldwide, over 170 countries |
| Headquarters: | Toyota City, Aichi, Japan |
| Operating Income: | $4.456 billion, by 30 June 2022 |
| Various brands of the company | Toyota, Hino, TRD, Daihatsu, Ranz, Scion, Gazoo Racing, Lexus and others. |
3. Toyota PESTEL Analysis
A Toyota PESTEL Analysis will evaluate the impact of the various external factors on the company's performance. Here is a detailed PESTEL analysis of the brand that will let us know about the forces and their advantages and disadvantages of them over its operations. The PESTEL factors that one should consider while executing the PESTEL analysis of Toyota are elaborated below:
Political Factors:
The political factors are vital to continue functioning for a multinational company like Toyota. Recently several companies have had to depend on political factors for their growth and development, thanks to globalization. The significant political factors in the case of Toyota are,
- A global company: Toyota is a company that has its manufacturing units across 28 countries and sells its produced vehicles in over 170 countries across the globe. For the company to keep functioning, the political status of these countries is a very vital aspect.
- Political stability: The political stability of a specific location decides whether the environment is positive or negative for the business. The government and its policies decide the future of international countries. Political stability is equivalent to a favorable environment for a business to run and thrive.
- Free trade agreements : The trade agreements with the local and state government allow a company to operate in a specific location. Free trade agreements are profitable to the business and will further enhance brand growth.
- Eco-friendly products: Another opportunity lies in producing and promoting eco-friendly products. It is possible with government support. The macro-environment of the units across the countries depends on the respective governments. For instance, Japan never had a good political relationship with China. Thus, Toyota could not flourish in this country. Due to the political turmoil in Europe in the recent past, the business was affected a great deal. In most parts of Asia, the political environment was much more stable and thus helped Toyota to gain a better position.
Economic Factors:
It is well-known that the better the economy, the better the chance of a business. Better the financial situation of the world market, the better it is for the growth of global companies like Toyota. The economy is a significant factor among other PESTEL factors. The market conditions are dependent on these economic factors. Factors like the GDP, per capita income, inflation, and purchasing power of an economy are directly proportional to a company's performance. The economic factors that influence the macro-environment of the brand:
- Competitors: The automobile industry has been seeing stark competition in recent years. The strong competitors of Toyota are companies like Tesla, Ford, and BMW. Also, on the flip side, the weakening of the Yen compared to the US dollar can give a better opportunity to gain in the US market.
- Growing economies: Developing countries are rapidly growing. Thus, creating an opportunity for a potential market for automotive manufacturers. The growth of the US economy means there is a massive opportunity for the manufacture and sale of vehicles.
- The recession caused by the pandemic: Though the pandemic has hit below the belt, adversely affecting the demand, supply, and overall global market, the market is seeing a steep rise post-pandemic. The world economy is growing at a fast rate compared to the pre-pandemic situation. It is a favorable environment for a company like Toyota to sustain and grow.
Socio-cultural factors:
Toyota is a multinational brand. Thus experiences the impacts of sociocultural factors on different communities belonging to varied geographical locations. This dimension of the PESTEL analysis of Toyota refers to the social trends that influence the business. In the case of Toyota, the primary external social factors are:
- Vehicles recalling: Toyota had to recall vehicles due to faulty fuel pumps. They had to recall a staggering number of automobiles that counted to over 700,000. It not only hugely cost the company but also damaged its reputation. They resolved the problem, but the mark remained.
- The demand for electric vehicles: The market is changing rapidly, and customers are more preferring eco-friendly cars to existing ones. Electric and hybrid vehicles are much more in demand right now. It is an opportunity for a vehicle manufacturing company to produce more environmentally friendly cars to attract the current market.
- Faulty Safety issues: Safety features are an essential element that a customer looks into a car. Toyota vehicles were declared unsafe due to faulty acceleration and pedal systems. Toyota had to face the outrage of many customers and thus lost their trust. It cost the company billions of dollars.
- Economical Indian market: Due to the cultural aspects, the Indian market prefers economic yet bigger cars. The market was a perfect fit for automobiles, like Innova, which was an instant success.
Technological factors:
The company spends millions of dollars annually to encourage research and development in the automotive sector. The result is that the brand has some technological advancements on its hat.
- Innovative Hydrogen cars: It is essential to sustain the business in the competitive market. Toyota was the first to introduce hydrogen cars in the market with its research and development motive. Hydrogen and electric cars are the future of the automobile sector. Toyota moved a step forward compared to its competitors by launching hydrogen cars.
- Going by the technological trends: Toyota follows the rule of continuous progress. It has always accepted the latest trends in automobile technology which has aided the brand to stay on the top list of the global market.
Environmental factors:
Some environmental factors impact a company's growth. PESTEL analysis of Toyota shows that these environmental factors have a pivotal role to play in shaping the future of a vehicle manufacturing company.
- Lower carbon footprints: Toyota understands that a car manufacturer affects the environment. The most challenging environmental issue right now is lowering the carbon footprint. The company has introduced hydrogen, electric, and hybrid cars to fight the number of carbon emissions. It also believes in a recycle-based sustainable society and thus optimizes its operations accordingly.
- Legal Factors: Legal compliances assure the smooth functioning of an organization. Laws such as labor, quality-related, and other business laws vary across nations and markets when followed correctly to ensure a positive effect on the company's growth. However, sometimes, some legal issues may cause a disturbance in the macro-environment of the business.
Legal factors:
- Recall settlement: When Toyota recalled its vehicles with faulty mechanisms, some outraged customers filed a case against the company. It resulted in heavily costing the brand. The brand settled the case for 1.2 billion dollars with the cost of fixing the faults.
- Lawsuits : In another instance, an Indian company filed a lawsuit against the manufacturing giant. The Indian company named Prius was fighting for its trademark.
4. How to Do a PESTEL Analysis in EdrawMax
- Step - 1: Preparation
- Step - 2: Template Selection
- Step - 3: Add Textual Information
- Step - 4: Customize
- Step - 5: Export & Share
If you are using the offline version of EdrawMax, open the tool in your system. If you wish to access remote files, head to https://www.edrawmax.com/online/ and log in using your registered email address. If this is your first time using the tool, you can register with your personal or professional email address. Go to 'Marketing' diagrams under Business diagram type and click on 'PEST Analysis.'
EdrawMax has thousands of free templates. Head to the Template section on the left and type 'PESTEL Analysis' to see all the pre-built PESTEL Analysis templates like Netflix PESTEL Analysis, Amazon PESTEL Analysis, IKEA PESTEL Analysis, and more. Check the template that resonates closely with your business model. Click on 'Use Immediately' to import the template's contents to the EdrawMax canvas. You can start customizing the PESTEL analysis diagram as per your requirements. If you want to draw the PESTEL analysis diagram from scratch, you can click '+.' It will open up the user-friendly canvas of EdrawMax that has several features that ease your efforts in making PESTEL analysis diagrams.
PESTEL Analysis diagram requires you to add Political, Economic, Sociological, Technological, Legal, and Environmental content so that the reader will understand what influences an organization. Use the PEST symbols from the left side and add the content to your PESTEL analysis diagram.
EdrawMax gives you ample options to customize your PESTEL Analysis diagram. From changing the background to adding content, you can customize the diagram in any way you desire. In addition to this, you can go ahead and change the background color, modify the text, add hyperlinks, add multiple pages, add images, and even add vector-enabled texts to your PESTEL analysis diagram.
Once satisfied with your PESTEL Analysis diagram, you can export it into multiple formats, including Microsoft, JPEG, PNG, Visio, HTML, and more. EdrawMax lets you share your PESTEL Analysis diagram on social media platforms, like Facebook, Twitter, Line, etc.
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5. Key Takeaways
The Toyota PESTEL Analysis carried out in this article gives a detailed view of several factors. It plays a significant role in uplifting or degrading the company. It is primarily a study to analyze and understand the opportunities and drawbacks of the macro-environments of a global company that operates in many different nations with different political, economic, sociocultural, technological, environmental, and legal statuses. The PESTEL analysis of Toyota shows how a multinational brand can take the opportunity from some situations and why some issues they should avoid to keep the growth margin growing.
A detailed Toyota's PESTEL analysis report is an essential management tool that can help the company understand all the factors that influence it. As you analyzed in this article, creating and sharing a PESTEL analysis diagram with EdrawMax Online is easy, efficient, and affordable. This free PESTEL analysis diagram software offers many elements that ease your efforts when creating complicated PESTEL analysis diagrams. With the help of EdrawMax, you can also share your diagrams on different social media platforms, like Facebook, Line, Pinterest, and more.
Reference
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Pratap, A., 2022. TOYOTA PESTEL ANALYSIS., [online]. notesmatic. Available at: https://www.notesmatic.com/toyota-pestel-analysis/ (Accessed 31 August 2022).
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Shaw, A., 2022. PESTLE Analysis of Toyota | SWOT & PESTLE Analysis., [online] SWOT & PESTLE Analysis. Available at: https://swotandpestleanalysis.com/pestle-analysis-of-toyota/ (Accessed 17 August 2022).
