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Developing a business strategy for Toyota corporation in the United
Kingdom Business Environment

Name :

December 2010

Introduction
This research aims to develop a business strategy for Toyota Corporation particularly in the UK
business environment
...

Subsequently, the ways that strategy is formulated in this organisation will be critically
discussed
...
These provide the effective way to
identify the strategic capability of Toyota in the UK
...


1
...
Toyota has been expanding globally and eventually,
while operating in every country, it would be directly affected by the country business
environment even has to adapt to sustain its competitive advantage
...
It is impossible for Toyota to be
separated from political, Economic, socio-cultural, environmental and legal affects of the UK
environment
...
Strategy Development
Automobile industry is highly competitive and since an industry rules arise from the structure of
industry (Porter, 1980) only organisations could have survived to have significant economy of
scale, strong brand and update and innovative technology
...
For Toyota to formulate a strategy, the
characteristics of competitive interactions in the UK car industry structure must be identified
...
The external factors could be:
Political/regulatory drives: Most of the recent policies and legislations presented by various
governing bodies of UK & EU, deal with improving the environmental standards by which cars
are developed, operated, and disposed of
...

Economical drives: in the UK, change in exchange rates, economic growth and inflation will
directly affect Toyota and other carmaker and their strategy development accordingly
...
Recently, Society pressurise the automobile industry and governments to take
responsibility for the environment and to take steps to help preserve it
...
This would affect Toyota
accordingly
...

Internal drives could be highlighted as change in buyer’s behaviour, suppliers, substitutes, new
entrants, incumbent rivals and inevitably involve interaction with external factors
...
Some
sources of rigidity in automobile industry which make rules more inflexible are:

3

Underlying conditions: In automobile industry some structural factors are inherent and
unchangeable
...

Car industry integration: In automobile industry interrelation between various aspects of
industry has made it difficult to predict direction of change over time
...


State: Dimensions of automobile industry development
Dimensions of development for Toyota UK as the part of automobile industry, could be
evaluated as following:
Convergence versus divergence: As automobile industry develops towards more diversity
resulted from introducing new innovative business models to survive in competition, dimensions
of development for Toyota in the UK as a part of automobile industry would be divergence
...


Direction: Paths of automobile industry development
Based on drivers/inhibitors and dimensions of automobile industry, paths of development could
be mapped
...
Thus, Toyota UK has to compromise with
social, legal and economical aspects of business environment and continuously develop its

4

business strategy through innovative technology, safety standards and eco-friendly cars to meet
customers’ needs and expectations
...
External Environment Analysis
To conduct an external analysis for Toyota in the UK, following tools could be implemented:

a
...
It offers a comprehensive catalogue of influences
on the possible success or failure of particular strategies for Toyota in the UK as following:



Political

The Political changes in the UK, EU with automobile industry are intertwined and have led to
recent legislation
...
A stretching target of 130g/km CO2 by 2015 and 95g/km
by 2020 has been set which provides a clear and accelerating trajectory for the deployment of
low carbon vehicles and adaptation of new ultra-low carbon technologies
...
Therefore, proposed legislation by the UK government could affect and change
strategy for Toyota
...
The
recent global recession had negative impact on the economy worldwide and the carmakers as the
part of it
...
However, According to ONS (2010), the GDP grew increased by %0
...
8 higher than 2009
...
The
currency exchange rates puts Toyota UK at a disadvantage when export to countries that use the
Euros as GB Pound has been more valuable than the Euro for the past few years (finance
...
Because vehicles produced in the UK are evaluated in GBP, but when sold in the EU, are
evaluated in Euros
...
For instance, Oil
crisis affects the price of fuel and fluctuate economic & political conditions of global markets
...
Eco-concerns have
connection with ethics and corporate social responsibility
...
However, it will be up to the
corporations to be ethical in their compliance to new policies (Howarth, 2006)
...
Thus, changing social mentality towards being climate conscious,
change in demography and expectation of UK Society and availability of potential expert local
workforce could be social factors which Toyota could possibly face in the UK
...
Alternative sources of power and different
materials need to be developed in order to reach standards set by the EU
...

Additionally, safety standards have been raised, which will require automakers to improve on
existing technology and rethink the way vehicles are produced to meet new standards
...

The impact of raising global awareness regarding Climate Change has resulted to the social
pressure on manufacturers to be more “green” in their production methods
...
Socially aware consumers will influence Toyota UK by becoming increasingly eager to
do their part to help the environment by purchasing alternatively powered vehicles
...
Safety is
another important aspect of the legislation introduced for the automobile industry and Toyota
need to be aware of mandatory directives
...
The key for automakers is to be able to

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mass produce such technologies at a reasonable price while maintaining a high standard for
quality
...
Porter’s 5 Forces Network
This model which helps to identify and analyse the competitive strategy in car industry, would be
implemented as following:

Rivalry among Existing Competitors
The worldwide automotive market is extremely competitive and Toyota faces strong competitive
rivalry in the extent of Globalization
...
The
factors which affect competition between rivals could be product quality, innovation, pricing
terms, fuel economy, reliability, safety and customer service
...
Obviously, Porter`s Competitive Rivalry among existing competitors is significant
...


Threat of New Entrants
Competition in the UK is increasing rapidly with new entrants coming into the market from
China, South Korea and new plants in Eastern Europe
...
Not only there will undoubtedly be new entrants into the
environmentally friendly alternatives car market and improving “green” vehicles, but existing
automobile manufacturers have developed alternative energy source vehicles as well
...

8

Bargaining Power of Suppliers
The materials used in automobile production have been regulated
...
This type of directive would increase power of suppliers as suppliers may
be able to charge more based on the limited number of options automakers have
...
Specialist products usually have few suppliers, which strengthen the power
of supplier
...
For instance, if GDP in the
UK decrease, the demand for new cars would presumably drop as disposable income of buyers
reduce
...

However, cars have huge variable potential customers, for example, security concerns of driving
lead to increasing loyalty to well-known brands
...
There are a
number of low cost alternatives to cars, including National Rail, various charter coaches and
privatised rail services
...
Porter’s substitute threat force is significant because it can diminish the demand for cars
...


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Diagram 1 - The five forces which shape competition in automobile industry

Threat of New
Entrants

Bargaining
Power of
Suppliers

Rivalry
among
Existing
Competitors

Bargaining
Power of
customers

Threat of
Substitutes

c
...
They compete on setting key decision variables
such as product market range, product quality, technology and distribution channels
...
In automotive industry, a
variety of analysis from different points of view, such as segmentation, differentiation and
degree of global focus can be conducted
...
The UK motor
industry trade association, the society of Motor Manufacturers and Traders (SMMT), has formed
segmentation into nine market segments on the basis of vehicle size, and this method has been
widely accepted throughout the industry
...


4
...
Toyota has established well-known, trusted and reputed brand over long time
...
The main
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strength of Toyota is implementing innovative and update technology which could be consider as
a competitive advantage
...
Currency exchange rate puts
Toyota UK at a disadvantage when selling to countries that use the Euros as vehicles produced in
the UK are evaluated in GBP, but when sold in the EU, are evaluated in Euros
...
Recently, the safety
issue of automobiles which led to recalling huge number of cars has negatively affected Toyota`s
global reputation
...
As the UK economy is on recovery
process (national statistics, 2010), this means the boost of demand for cars and as Toyota has
been widely recognised brand, it must exploit this opportunity to attract and target new potential
customers by appropriate business strategy
...


Conclusions
To develop a comprehensive business strategy for Toyota in the UK by implementing
cooperative tools which have been already reviewed, Macro and Micro Business Environment
factors must be analysed and evaluated to identify most appropriate strategy which fits the
business
...
bis
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