This PEST analysis of Toyota goes through the political, economic, social and technological factors that affect the top green automobile manufacturer.
In 1937, the automobile company, Toyota, was formed. This Japanese-based brand is known for their intense research and development. They’re leading the way in vehicle innovation as the first producer of the hydrogen car. The firm also praised for being eco-friendly — in fact, Toyota is the top green automobile manufacturer in the world.
But at one point, the company almost collapsed after a severe vehicle error. Consumers turned their back on this popular automobile brand. A company, nearly destroyed, because of one big problem and a series of smaller ones, all of which were the fault of Toyota. You can find out why, as well as the other factors affecting the company, in this PEST analysis of Toyota.
Political factors: Moving into the right countries at the right time
Toyota has expanded into several countries to meet the demand for their vehicles. In 1992, Toyota began manufacturing in the United Kingdom. During this time, the entirety of the European market essentially became one, giving Toyota a much bigger market to offer, make, and sell their products. Plants were set up in the UK where the company employed locals, allowing expensive tariffs to be avoided.
Because the European market was about to boom, and political parties were stable, Toyota made the right decision to expand into the UK market. But when the political situation is less sturdy, Toyota doesn’t make the mistake of pushing forward, as seen with Thailand five years ago.
Toyota considered increasing car development in Thailand. They were willing to invest over 20 billion baht (or more than $69 million USD) in 2014. However, Thailand’s political situation became questionable. So questionable in fact, that Toyota lost faith in Thailand and didn’t believe the country’s demands would be high enough to offset the price invested.
And if a country is either in political turmoil or has a stand-offish relationship with certain countries, a company shouldn’t expand into it. Initially, before the political troubles, the expansion into Thailand could’ve been a smart decision for Toyota. However, once the problems began, the right choice was to hold off.
Economic factors: The need to adapt to new technology
The automobile industry is a competitive landscape these days. Toyota competes with not only other brands from their home country Japan, but also worldwide brands too, such as Ford and BMW. It’s a constant battle of price, performance, customer satisfaction, and research and development. And then, of course, there’s demand. What cars do people want and need? It depends on location, income, and desire.
When the recession hit, Toyota suffered just as any other company did. People weren’t in a position to be buying cars, much less luxurious cars, while they scrambled to pay for rent and food. Sales decreased. And there wasn’t much Toyota could do.
Although the recession seems like a nightmare from the past, it does still affect certain brands. Toyota is one of those brands. Add in the many laws and restrictions about importing foreign vehicles, and it’s that much harder for Toyota to stand out.
Changing oil prices cause people to want smaller, more fuel-efficient cars. For those consumers who are fuel conscious, they may shift towards the newly built electric cars. It seems electric and hybrid cars are the future of driving; automotive companies need to invest into this technology. Otherwise, they’ll be left behind by the companies who aren’t shy about adopting this new type of vehicle. Toyota isn’t shy and doesn’t plan to be.
And then there are problems more native to Japan, such as the strength of the Japanese dollar, exchange rates, and natural disasters that regularly affect the Japanese people. Each of these things directly affects sales, whether it’s in Japan, or related to selling and exporting cars to other nations.
Social factors: A malfunction ruined Toyota’s brand image
Toyota isn’t free from manufacturing debacles. The company has had to recall vehicles, as well as pay penalties and fines, because of car malfunctions. Specifically, passengers reported that their automobiles were going out of control. Something that affects millions of people worldwide can destroy a company.
Toyota barely made it out of this error in one piece. The company did accept fault and vowed to investigate what went wrong (later, they found the problem was with the pedals and acceleration). Toyota paid out billions of dollars for this error. But that wasn’t enough.
People became less likely to buy a Toyota vehicle because they felt unsafe. They couldn’t trust the vehicles any longer. And, unfortunately, Toyota isn’t the only car manufacturer available these days.
So, when the negative opinions by his customers reached the president of Toyota, his lackluster response worsened the company’s public opinion. Instead of dedicating a PR team to handle this fallout delicately, the company stepped back and let the media do as they wished. Again, this bit them in the shin, and made everything that much worse. Once the public has soured, it’s hard for any company to change their opinion.
Hindsight is 20/20, but Toyota should’ve been more active. Instead of sitting back and watching, the company should’ve soothed public concern, defined a plan of action to prevent this type of automobile malfunction from happening again, and promised to do better.
Technological factors: The first hydrogen car
Toyota is the first company to launch a hydrogen car. The company puts massive emphasis on research and development, looking for ways to offer vehicles with alternative fuel options. Not only because of oil scarcity, but also because energy vehicles face similar problems as well.
Energy density stands in the way of electric cars being the leading fuel method for vehicles. While this is being sorted, we’re seeing an abundance of hybrid cars. Toyota is in on this trend, and often leads by tinkering with engine modifications.
Innovation is critical for automobile industries and Toyota refuses to be a brand who plays catch-up while all others are paving the way into the future.
Photo by Chandler Cruttenden on Unsplash
