THE UNIVERSITY OF DANANG

VNUK INSTITUTE FOR RESEARCH AND EXECUTIVE EDUCATION

GROUP PROJECT
Goal Team
Module: Global Environment Of Business
Lecture: Mr. Ha Huy Anh

Mrs. Nguyen Thi Linh Nga

Members : Thái Thị Ngọc Anh - 22080036

Trần Thanh Thảo - 23010006

Nguyễn Thị Quỳnh Nga - 22010012

Nguyễn Huỳnh Kim Ngân - 22010017

Huỳnh Lê Kim Phương - 22080023

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Table of Content
I.Abstract .....................................................................................................................................3

II.Introduction.............................................................................................................................3

1. Toyota Motor Corporation Overview ............................................................................3

2. Current Context ................................................................................................................6
3. Potential Market: Japan and Germany .............................................................................7
III. Potential Country Analysis of Toyota Motor Corporation .................................................10
1. Japan ................................................................................................................................10
2. Germany............................................................................................................................15
IV. Recommendations ...............................................................................................................20
V. Limitations ...........................................................................................................................25
VI. Conclusion...........................................................................................................................29
VI. References ...........................................................................................................................30

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I.Abstract.
The report elaborates on a case study of Toyota Motor Corporation which is an automobile producer
based in Japan and regularly ranks among the top producers of automobiles worldwide. In the first
section of the report, there is a description of the company’s profile, the size of business, the
philosophy of the enterprise, main spheres of activity, competitive edge, technologies, position, and
areas of sustainability... The report progresses to the current situation of Toyota including: its
commanding position, electric cars propensity, advancement in the fields of technology, government
regulation provisions, supply chain issues and preferences of the customers. Economies of Japan and
Germany are selected as the markets for the PESTEL analysis with the following recommendation
from the report. The recommendation is that Germany should be the preferred long term market for
the corporation activities because of positive technology, environmental, and social factors.

II. Introduction.
1. Toyota Motor Corporation Overview
COMPANY PROFILE
Date of foundation: August 28, 1937
Amount of capital as of March 31, 2024: 635 billion yen
Location of headquarters: 1 Toyota-cho, Toyota City, Prefecture Aichi 471 8571 Japan
The name of the founder: Kiichiro Toyoda
The head of the company: Akio Toyoda
Business organization form: Corporation, Public Company
Listing: TYO: 7203; NYSE: TM
BUSINESS SIZE
• Revenue (2022): About 280.5billion USD
• Employees: 70,224 (Currently around 370000 employees all over the world)
• Countries of activity: More than 170 countries worldwide
• The production capacity of the company is: Around ten million cars each year
• Market share: 10%
CORPORATE PHILOSOPHY
The Toyoda Principles (Corporate creed)
Always be loyal to self and one’s purpose, hence aiding the Company and humanity.
Always be hardworking and inventive, looking for what is called fashionable progress in the present
time.

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Always be practical and do not engage in triviality.
Always aim to cultivate a pleasant environment that is like a home at work places.
Always honor the sacred and remember appreciation at all times.

CORE BUSINESS AREAS

Main brands: Toyota
Lexus (Luxury)
Daihatsu (Compact range automobiles)
Hino (Commercial automobiles)
Product Portfolio:
• Cars
• SUVs and crossover vehicles
• Commercial vehicles
• Hybrid and electric-powered vehicles
• Hydrogen-powered fuel cell vehicles
• Truck and buses
COMPETITIVE ADVANTAGES
• Strong Brand Recognition
• Quality & Reliability
• Advanced Technology
• Global Manufacturing Network
• Efficient Production System (TPS)
• Strong Financial Position

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KEY TECHNOLOGIES
• Toyota Production System (TPS)
• Hybrid Synergy Drive
• Toyota Safety Sense
• Electric Vehicle Technology
• Hydrogen Fuel Cell Technology
• Autonomous Driving Systems
MARKET POSITION
• Manufacturer world's largest carmaker
• Hybrid technology leader
• Strong presence in major markets
• Diverse product portfolio
• High brand value
SUSTAINABILITY INITIATIVES
Environment:
• Carbon neutrality
• Eco-friendly vehicle development
• Waste management
• Renewable energy use
Society:
• Community development
• Road safety program
• Education support
• Disaster relief
STATEMENT FOCUS
Current priorities:
• Electric vehicles Development
• Digital transformation
• Market expansion
• Sustainable mobility
• Innovation & Research
Future goals:

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• Carbon neutrality
• Advanced mobility solutions
• Market leadership
• Technological innovation
• Customer satisfaction
Strengths
• Strong financial performance
• Global manufacturing network
• Research capabilities & Development
• Brand Reputation
• Quality Management
• Innovation Leadership
This overview provides a comprehensive picture of Toyota Motor Corporation's current position,
operations, and strategic direction in the global automotive industry.
2. Current Context
Current Context of Toyota Motor Corporation
Contemporary understanding of the Toyota Motor Corporation must include a number of issues as
the company is now working in a turbulent environment defined by a number of characteristics.
Market Leadership: Currently, Toyota is the automobile manufacturer per excellence—which
assembles, manufactures, and globally distributes automobiles on a true quality standard basis—the
company has been able to span both traditional industries and emerging markets.
Shift to Electrification: The desire for electric vehicles is a shift that is currently dominant in the
modern industrial design space, particularly worldwide. In anticipation of a heightened demand for
clean transportation technology, such as hybrid and battery electric vehicles,
Toyota is stepping up its ventures in those areas.
Technological Advancements: The changing nature of technology within the automotive industry
continues, focusing more on autonomous and connected vehicles. R&D investments are becoming
increasingly commonplace for corporations like Toyota that seek to enhance their competitive edge.
Regulatory Pressures: New, enforceable legal limits with regard to emissions are becoming accepted
and so any country looking for soft regulations is likely to be increasingly disappointed. These
developments are furthering the requirement for Toyota to improve its low-emission and green
vehicle offerings to remain compliant.

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Supply Chain Challenges: The pandemic triggered by COVID-19 has drawn attention to the fragility
of global supply chains with particular reference to semiconductors. Strategies are being developed
by Toyota to avoid supply chain interruptions.
Customer Preferences: Eco-friendly automobiles are becoming more and more popular. Toyota has
an advantage in the market because of its emphasis on electric and hybrid vehicles, which fits in
nicely with this trend.
Toyota wants to achieve carbon neutrality by the year 2050. The corporation intends to increase its
reliance on renewable energy sources and employ green production practices.
The automotive industry is becoming more competitive. Companies of all sizes, including Tesla, are
altering the rules. To keep ahead of the competition, Toyota must thus improve its strategy.

3. Potential Market: Japan and Germany.

Germany stands out as a key market for Toyota Motor Corporation due to its booming car industry,
advanced engineering know-how, and growing push for green transport. This paper looks at the
many good reasons that make Germany an attractive market for Toyota to expand.
According to The Automotive Industry in Germany report, the following factors will explain why
Germany is a potential market for Toyota.
- A strong car market
German car sales top the charts in Europe, with 3 million new vehicles sold there each year. This
huge volume offers Toyota a chance to make a lot of money and cut costs in making and shipping

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cars.
Different Types of Buyers: The German market has all kinds of customers, from those who love
fancy cars to those watching their pennies. This mix lets Toyota hit several markets well, including
with its high-end brand Lexus.
- The Competitive Environment
Presence of Well-Known Brands: Germany serves as the home base for several major car
manufacturers, including Mercedes-Benz, BMW, and Volkswagen. This forces Toyota to keep
improving its products to meet high standards in a competitive scene that encourages new ideas.
Chances to Compare: The tough market gives Toyota the opportunity to measure its products against
some of the best in the business helping it stay ahead of the curve in both areas.

- Consumer Preferences for Technologically Advanced Vehicles

High Standards for Quality and Performance: Consumers from Germany are among the most
fastidious when it comes to the purchase of vehicles since they expect the best brands in the market,
and owning them is an assurance of say, status in the society. Toyota, an automaker known for
reliability and innovation seems to have come well into these expectations and thus able to compete
in the market.
Growing Acceptance of Hybrid and Electric Vehicles: The demand and supply of hybrids and EVs
is increasing in Germany and this has been spurred by the mounting awareness of customers towards
eco-friendly alternatives. With its considerable capabilities and experience in hybrid technology,
Toyota is likely to benefit from this growth trend.

- Commitment to Sustainability Government Initiatives and Incentives: The existence of

purchase incentives for EVs such as subsidies and tax reliefs are initiatives that the German
government has rolled out for its citizens. These initiatives motivate consumers to go for eco-
friendly cars which are in tandem with Toyota’s sustainable plans.

- Regulatory Framework: The high emissions regulations that have been set in Germany
obligate the manufacturing and use of low-emission car models. The availability of hybrid
and electric models in Toyota’s portfolio makes the company fulfill most of these regulations
and thus improves its attractiveness in the market.
Technological Innovation Hub Research and Development Ecosystem: There is a very well
developed automotive research and development system in Germany, with many universities and
institutions active in the field of automotive engineering. Partnerships can help grow technological

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areas such as battery development, autonomous driving, and connectivity.
Participation in Industry 4.0: This is one area where Germany is at forefront in regional and a global
race in being an adopter of smart manufacturing through Industry 4.0 initiatives. Such advancements
can help Toyota integrate improvements in its production processes, increase operational reliability
and effectiveness, and innovate new products.

- Strong Economic Environment Economic Stability and Growth: The economy of

theGermany is the world’s fourth largest economy characterized by stability along with
growth. The GDP of Germany ranks amongst the highest in Europe allowing for an efficient
economic environment for car sales.
High Consumer purchasing power: According to the international statistics, Germany has one of the
highest GDP per capita in the world, which means high purchasing power for the German consumers
and hence better likelihood of them purchasing high end and environmentally friendly cars.
- Infrastructure and Logistics
Well-Developed Infrastructure: Germany is based with well-established transportation networks
which includes Autobahnen and good transport systems as well. This makes distribution and
logistics more efficient and eases Toyota’s business in the country.
Access to European Markets: Germany’s position at the center of Europe gives Toyota an efficient
opportunity to expand to other European countries. Therefore, setting firm roots in Germany would
provide for easier advancement into the neighboring countries.
- Cultural Factors
Preference for Domestic Brands: Germans are fond of domestic brands but there continues to be an
increased appetite for high quality foreign brands that offer advanced technologies and are
sustainable. In this respect, Toyota stands to benefit from its perceived quality and reliability in the
market. Increasing Environmental
Consciousness: Because of the increased focus on climate change and environmental issues, German
consumers have increasingly been making green choices. This attitudinal change fits in well with the
position of Toyota who prides its self on green technologies.

III. Potential Country Analysis of Toyota Motor Corporation

A PESTEL analysis evaluates the Political, Economic, Social, Technological, Environmental, and

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Legal factors that affect a business operating in a specific country. This is a potential country analysis

of Toyota Motor Corporation in Japan using the PESTEL framework:

1. Japan.
1. Political Factors:
Government Policies and Support for the Automotive Industry:
According to “Japanese Firms Seek Political Stability and Stronger Alliance: Survey – IOG survey
results of 100 Japanese companies on Economic Security –news from the Institute of Geo-
economics (IOG) 2024”, with the Stability in Governance, this has meant that Japan provides a stable
political environment in terms of business risks, which is ideal for long-term investment by Toyota
and other car manufacturers. This yields a predictable course on environmental policies, technology,
and industrial development, hence exposing Toyota to minimum risks as it figures out its strategic
plans and activities. Overview and analysis of automobile innovative measures Japan has been very
keen on supporting innovation in automobiles. There are programs and subsidies designed to
encourage EVs, hydrogen fuel cells, and self-driving car Initiatives for further development of
important technologies crucial to the evolution of mobility. These are incentives for taxes, grants, and
subsidies to help Toyota enhance its competitiveness in the global market for the said lines.

Trade Relations and Agreements:

As stated by” Impacts of free trade agreements on business activity in Asia, Export Policies and
Free Trade Agreements (FTAs)”, in the Japanese case, there are several FTAs in place that enable
your product, the automobiles, for instance, to penetrate the market with little tariffs. Some of it
consists of the EU, the United States, even a limited FTA, and a network of regional agreements in the
Asian region under the RCEP. These FTAs are beneficial to Toyota because they relieve the burden of
transport costs for exporting cars and components, which makes Toyota continue selling their goods in
foreign countries. Diplomatic Relations with Major Markets: For Toyota, the major trading partners’

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diplomatic relations with the USA, China, and the EU are essential. Good political relationships
contribute to decreased measures of trade friction, decreased overall tariffs, and stability in Toyota’s
export-based strategic framework. For example, political relations with the world’s largest market, the
United States, affect tariffs and ease and access to the market for Toyota's products.

2. Economic Factors:

The Integrated Report 2023 mentioned that “Japan itself has a very developed economy”,
modern infrastructures, and quality manpower; the strength of its consumer purchasing power will
make the market increasingly attractive and competitive. This level of economic stability will enable
the company to bring fairly measurable economic risks to bear on R&D, plants, and equipment
together with supply chains. Technically, Japan is one of the economically and structurally most stable
countries in the world, but it has had, for instance, long phases of low economic growth and deflation.
The deflation environment focuses on lower prices, and slower consumers going to the market for new
vehicles may also affect the luxury or premium segment. It might be obligatory for Toyota to use
incentives, promotions, and even pricing strategies so as to revive sales within Japan. Aging
Population and Decreasing Domestic Demand, With the constantly aging population and reduced birth
rate in Japan, the market for new cars is thereby reduced in the market. Though this demographic has
waned, it has played a role in a global trend of reducing Car Acquisition Rates in the domestic market.
As a result, most of Toyota’s concentration area has been transferred to the international markets to
ensure it achieves high revenues and profits.

According to Author et al., From nonconsumption to market creation: How Toyota became an
economic powerhouse for Japan 2024, contribution to Japan’s GDP and Employment, Toyota is
not only the largest car maker in Japan but also one of the largest producers which provides most of
the contribution to the annual GDP and employment of the nation. The commercial enterprise aquires
directly thousands of employees while it indirectly impacts so many people via supply chain to Global
Market Influence and Economic Dependency. As is suggested, this makes Toyota critical for Japans
economic wellbeing since its health is directly tied to the trajectory of economic growth, government
revenues, and sp spatial development. Dependence on Global Economic Conditions, Toyota
organization profit and income reliance depend on the general economy, especially in the united states,
Europe, and China. Climb especially in those regions which affect the people’s purchasing power
hence have an effect on Toyota sales through affecting demand. In particular, Toyota’s international
sales reflect certain volatility during periods of global economic instability, for example in 2008-2009
years and, more recently, during the COVID-19 pandemic.

Research from “Pan, The impact of exchange rate fluctuation on Toyota financial performance
and its hedging strategy” shows that the impact of Yen fluctuations of JPY is the most sensitive
currency to Toyota’s business because the company conducts most of its operations within an export
centralized strategy. Whenever the yen rises against other currencies, Toyota’s automobiles become
expensive in other counties, and hence become unfavourable in the global market. Also, the higher the
yen, profitability will be impacted since the foreign income business translates to fewer yen. Currency
Hedging and Financial Tactics is another social risk faced by Toyota is exchange rate risk, whereby

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exchange control affects earnings by making use of hedging techniques to control for any influx of
unexpected fluctuations in exchange rates. However, the company has cut its vulnerability to such
unfortunate happenings by setting up manufacturing and sourcing activities within major sales areas,
thus experiencing less of the pangs of currency fluctuation.

3. Social Factors:

“More than 1 in 10 people in #Japan are aged 80 or over”. Here’s how the country’s ageing
population is changing in this important threat to Toyota internally, the rapidly ageing population of
Japan. Because old people may not use their money to purchase new cars, the sale of cars in this
category may be reduced. To address this issue, Toyota might have to draw up cars geared towards the
elderly and specially equipped vehicles that can easily be accessed by elderly drivers, come with extra
safety measures, and have advanced technologies that enable the driver to be assisted automatically.
Instead, Toyota could increase its dependence on international markets with young and growing car
consumption societies. At the time of this study, Japan’s urbanization was above average, meaning
that an increasing number of consumers reside in urban areas. This urban culture gives a higher
demand for small and energy-effective vehicles that could be managed easily during traffic jams and
find suitable space to park. This is an area that Toyota will be in a strong position to exploit and
develop new series of cars that will be stylish, compact, and efficient, with low emissions and high
fuel efficiency, which is perfect for the urban-based consumer. Therefore, focusing on the creation of
intelligent vehicles with small sizes, Toyota will be prepared to meet the need for automobiles in cities
and retain its market position in urban car production.

4. Technological Factors:

Innovation and R&D, It is noted by “the corporation that Toyota unveils new technology that will
change the future of cars: Corporate: Global newsroom” that Japan’s Leadership in Automotive
technology. As one of the world’s pioneers in automotive and manufacturing innovation, Japan offers
a supportive environment for Toyota's technological growth. Governmental initiatives are actively

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driving advancements in key sectors like low-emission vehicles, autonomous driving, and intelligent
manufacturing, which are in line with Toyota’s strategic objectives. This alignment enables Toyota to
advance cutting-edge automotive technology with a focus on environmental sustainability and high-
tech solutions. Investment in Autonomous Driving, Toyota has committed extensive resources to
developing autonomous vehicle technology, aiming to ensure self-driving cars are both safe and
reliable. The company is focused on refining advanced driver-assistance systems (ADAS) that
enhance driver safety and ease of use. Toyota’s partnerships with technology firms help to integrate
artificial intelligence (AI) in navigation systems and enable real-time data analysis, which contributes
to the efficient and safe operation of autonomous vehicles.

Industry 4.0 and Smart Manufacturing, As noted by “How Toyota uses Automation Robots:
Toyota’s Industry 4.0 partner, Robots.com: T.I.E, Automation and Robotics”, Japan has advanced
the creation of automation and for Toyota this includes the use of its advanced robotics in production.
Automobile manufacture for example has now resulted to the use of robots in welding, painting and
assembling as it is more accurate, faster and safer. In adopting these technologies, Toyota improves
the quality of the product to be produced and minimize the human intervention in the clerkial and
risky positions. AI-Driven Manufacturing, Toyota makes use of artificial intelligence in all its
production processes ranging from equipment maintenance forecasting, quality control, and
production calendar. By applying real-time data analysis, it becomes possible to predict various
equipment failures as to reduce such incidents and maintain continuous and smooth processes.
Moreover, AI-based quality control keeps an eye on prospective defects at different phases of
production, so the corporation can maintain the highest quality of automotive production.

5. Environmental Factors:

As stated by “2024-03-policy-eujapan-automotive-environmental.PDF”, robust environmental

regulations, to support the development of sustainable economic initiatives, the laws on environmental

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protection have been enacted in Japan as an integrated system. These regulations push original
equipment manufacturers such as Toyota through portable tools that force manufacturers to consider
their impact on the environment and find ways to minimize carbon footprints, among other things.
Such legislation not only creates competition in the market for sustainable vehicles but also increases
the understanding of the public and consumers about environment-friendly products.

As stated by Unfccc.int, Climate Change Regulations, Commitment to the Paris Agreement Japan
being a party to the Paris Agreement also shows its willingness to fight climate change and lower its
emissions of greenhouse gases. This global agreement requires the member countries of the world to
draw out and enforce policies that regulate the amount of global warming and encourage the use of
environmentally friendly practices. Being the largest automobile corporation, Toyota is supposed to
follow the leading policy of Japan and adhere to these international climate goals and plans.

6. Legal Factors:

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“Toyota Motor Corporation” argues that a company born from Innovation Intellectual Property
Protection, High IP standards in Japan is also very important in helping Toyota since it offers a secure
environment where the firm can protect new but vital automotive technologies. These laws assist in
preventing any third party from using Toyota’s proprietary designs and inventions and therefore allow
Toyota to protect its ground in the market. Restrictions in Japan give particular stipulations to Toyota
regarding the employees’ rights, wages, as well as working environment. Since Toyota uses a large
number of people in its line of production, it must follow such laws. Of course, compliance also
contributes to the protection of the employees as well as improving the growing company image of
Toyota to avoid legal issues and cases against it or the staff.

2. Germany
“Germany is the world’s third largest automobile producer, with more than 70 percent of vehicles
produced here intended for export (UKEssays, 2015).”
The German automotive market, home to several renowned automotive manufacturers, has become
a key market for Toyota in Europe, gaining momentum through the years (Brussels, 2011).
Political factors of Toyota:

According to “Detailed PESTEL Analysis of Toyota”, political factors play a crucial role in the
ongoing operations of a multinational corporation such as Toyota. In recent times, numerous
companies have increasingly relied on political elements for their expansion and progress, largely
due to the effects of globalization. The political stability observed in key markets provides Toyota
with an opportunity to expand with reduced political friction. Additionally, free-trade agreements
involving the nations in which the company operates offer prospects for enhanced market
penetration. The key political factors relevant to Toyota include:

A global presence: Toyota operates manufacturing facilities in 28 countries and markets its vehicles
in over 170 nations worldwide. The political climate in these countries is essential for the company's
continued operations.

Political stability: The degree of political stability in a given region significantly influences whether
the business environment is conducive or adverse. Government actions and policies shape the future
landscape of international markets. A stable political environment is synonymous with favorable
conditions for business operations and growth.

Free trade agreements: Agreements established with local and national governments facilitate a

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company's ability to conduct business in specific regions. Such trade agreements are advantageous
for the company and contribute to its brand development.

Sustainable products: There exists an opportunity for the production and promotion of
environmentally friendly products, which can be supported by government initiatives. The macro-
environment of Toyota's operations in various countries is contingent upon the respective
governments. For example, Japan's historically strained political relations with China have hindered
Toyota's success in that market. Additionally, recent political instability in Europe has significantly
impacted the business. Conversely, the relatively stable political climate in many parts of Asia has
enabled Toyota to strengthen its market position.

Economic factors of Toyota:

According to “Detailed PESTEL Analysis of Toyota”, it is widely recognized that a business's

prospects improve in tandem with the overall strength of the economy. Global corporations such as
Toyota are likely to experience more robust growth when the financial conditions of the global
market are favorable. Among the various PESTEL factors, the economic aspect holds considerable
significance. These economic elements directly impact market conditions. Factors such as
purchasing power, inflation rates, GDP, and per capita income are all closely linked to a company's
performance. The following economic factors influence the broader environment surrounding the
brand:

Competitors: The automotive industry has experienced significant competition in recent years.
Prominent competitors of Toyota include firms such as Tesla, Ford, and BMW. Furthermore, the
depreciation of the Yen relative to the US dollar may provide increased opportunities for growth in
the US market.

Emerging economies: Developing nations are experiencing rapid economic growth, thereby
presenting a potential market for automotive manufacturers. The expansion of the US economy
signifies substantial opportunities for the production and sale of vehicles.

Pandemic-induced recession: Although the pandemic has severely impacted demand, supply, and
the overall global market, there has been a notable recovery in the post-pandemic period. The global
economy is advancing at a faster pace compared to the pre-pandemic era, creating a favorable

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landscape for a company like Toyota to thrive and expand.

Environmental factors of Toyota:

As stated in “Detailed PESTEL Analysis of Toyota”, various environmental factors influence a

company's growth trajectory. A PESTEL analysis of Toyota reveals that these environmental
elements play a crucial role in determining the future of an automotive manufacturing enterprise.
Toyota has the potential to enhance its portfolio of environmentally friendly products, including
electric vehicles and those with improved fuel efficiency. Additionally, the company can bolster its
sustainability performance by refining its business processes. Within the ecological dimension of the
PESTLE analysis, significant environmental factors present avenues for growth that the automaker
can capitalize on. Toyota's corporate social responsibility (CSR) and environmental, social, and
governance (ESG) strategies address ecological issues, offering the company a chance to enhance its
brand reputation while increasing the competitiveness of its vehicles. In the context of the external
factors outlined in this PESTLE analysis, similar corporate citizenship initiatives are evident among
competitors such as Tesla, General Motors, Ford, BMW, and Honda.

Reduction of carbon emissions: Toyota recognizes the environmental impact of automotive

production. Currently, one of the most pressing environmental challenges is the reduction of carbon
emissions. To address this issue, the company has launched hydrogen, electric, and hybrid vehicles
aimed at decreasing carbon output. Additionally, Toyota is committed to fostering a recycling-
oriented sustainable society, which informs its operational strategies.

Legal considerations: Adherence to legal regulations is essential for the seamless operation of an
organization. Compliance with laws related to labor, quality standards, and other business
regulations varies by country and market, and when properly implemented, these laws can positively
influence the company's growth. However, certain legal challenges may disrupt the broader business
environment.

Socio-cultural factors of Toyota:

The automotive market is undergoing rapid transformation, with consumers increasingly favoring
environmentally sustainable vehicles over traditional models. There is a notable surge in demand for

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hybrid and electric cars at this time. An automobile manufacturer has the opportunity to cater to the
current market by increasing the production of eco-friendly vehicles. Toyota has the potential to
expand its product offerings to meet the growing consumer demand for hybrid and electric vehicles.
Nevertheless, within this aspect of the PESTLE analysis, the increasing wealth disparity may lead to
a reduction in car demand across certain market segments. The organizational culture at Toyota
fosters an understanding among employees regarding the social dynamics of the industry
environment. This cultural element enhances the company's competitiveness by guiding strategic
decisions that consider external factors relevant to this dimension of the PESTLE analysis.
Furthermore, Toyota's marketing mix (4P) continuously evolves in response to social conditions to
effectively engage target customers. Social factors play a significant role in shaping the success of
the automotive company's marketing strategies.

Technological factors of Toyota:

The introduction of new hydrogen vehicles is essential for the company's continued existence in the
highly competitive automotive sector. Toyota, due to its commitment to research and development,
was the pioneer in launching hydrogen-powered vehicles. The future of the automotive industry is
increasingly oriented towards electric and hydrogen-powered vehicles. Toyota has the potential to
enhance its e-commerce capabilities or leverage third-party e-commerce service providers to market
certain products, including spare parts and accessories. Furthermore, this PESTEL analysis
highlights the opportunity for the company to improve its mobile applications and associated
services, thereby increasing customer engagement and loyalty, which can bolster brand reputation
and potentially drive car sales. Nevertheless, the company must confront the threat posed by
cybercrime, particularly corporate cyber-espionage. This aspect of the PESTLE analysis reveals
significant technological opportunities for Toyota, although it is imperative for the firm to
implement appropriate technological security measures to mitigate the risks associated with
cybercrime. The challenges identified in this dimension of the PESTEL analysis of the automotive
sector necessitate technological capabilities that align with the business strengths. The company's
business processes are structured to address these technological challenges. Toyota's operations
management incorporates technological resources and innovation focused on technology to
capitalize on the opportunities presented in this dimension of the PESTLE analysis.

Legal factors of Toyota:

According to “Automotive in Germany”, one of the most significant legal advancements concerning
automotive technology and mobility is the issue of the legality of operating self-driving vehicles on
public roads. Ongoing discussions are focused on more technology-friendly approaches. The revised

18
Vienna Convention on Road Traffic, to which Germany is a signatory, likely permits the use of self-
driving technology; however, it also appears to maintain the requirement for a human driver to be
present, capable of taking control of the vehicle at any moment. Additionally, amendments to
UNECE regulations, particularly UNECE Regulation 79, are currently under consideration. Even if
automated vehicles receive approval, it is probable that 'drivers' will be mandated to continuously
monitor the driving process and remain ready to deactivate or override the system at any time. In
March 2017, the German Bundestag enacted amendments to national laws to facilitate the type
approval of highly and fully automated (but not fully autonomous) vehicles, contingent upon the
presence of manual controls operable by a human driver.

Regarding the testing of automated driving systems, several German legal provisions already
establish a framework for authorities to grant specific exceptional permissions. In fact, numerous
exceptional permissions have been issued in Germany for several years to facilitate tests involving
automated vehicles. Consequently, tests have been conducted on public roads in Germany by
various entities, including Daimler, BMW, Audi, Bosch, and Delphi, as well as several research
institutes and organizations. Thus far, it appears that testing permissions for public road traffic
granted by German authorities have been contingent upon the requirement for a driver to be
available to regain full control at any time.

Intellectual Property Rights :

As a prominent player in the global automotive industry, Toyota places significant emphasis on
intellectual property (IP) legislation to safeguard its innovations. This encompasses patents for
advanced technologies, trademarks that represent its brand identity, and copyrights for software and
design elements. In both the United States and Europe, these legal protections are crucial in
preventing unauthorized exploitation of their technologies and in sustaining their competitive
advantage.

Antitrust Law:
Antitrust legislation aims to foster fair competition and deter monopolistic behaviors. In the United
States, the enforcement of these laws falls under the jurisdiction of the Federal Trade Commission
(FTC) and the Department of Justice (DOJ), while in Europe, the European Commission is
responsible for similar oversight. Toyota is required to ensure that its business operations align with
these regulations, steering clear of practices such as price-fixing or market manipulation that could
result in legal repercussions.

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Labor Law:
Labor regulations dictate the dynamics between employers and their workforce. Toyota is obligated
to comply with a range of labor laws that safeguard employee rights, guarantee equitable wages, and
promote safe working environments. In numerous jurisdictions, this includes honoring collective
bargaining rights and providing legally mandated benefits.

=> Toyota is the most environmentally friendly brand in Germany:

Firmenauto has acknowledged companies that excel in the fleet market by providing exceptional
quality through a customer-focused strategy. The title of "Environmentally Friendly Brand" has been
conferred upon Toyota. Beyond its range of conventional vehicles that boast low fuel consumption,
Toyota has been distinguished for its pioneering efforts in hybrid technology, offering an impressive
lineup of six hybrid models, which includes options from the compact Yaris to the spacious seven-
seat Prius+.

IV. Recommendations.
Japan Germany

Stable Governance: Global Reach

- A stable political climate ensures - Toyota has manufacturing plants in 28 countries
Political predictable business conditions. and sells vehicles in over 170 nations.
Factors - Environmental and technology policies are Political stability
clearly directed by the government. - A stable political environment supports business
- Encourages innovation through R&D operations and growth.
programs and subsidies in the area of Free Trade Agreements
electric vehicles, hydrogen fuel cells, and - Agreements with governments facilitate business
autonomous driving. operations and brand building.
Export Policies & FTAs Effect of Political Relations
Japan has signed FTAs with tariff reductions - Strained political relations, like those between
for car exports. Japan and China, can hamper market success;
- Important agreements with the EU, U.S., stability in Asia has helped Toyota.
and RCEP have lowered costs of exports. Political Instability
Diplomatic Relations: - Political instability in Europe has greatly affected
• Close ties with major trading partners such Toyota's operations.
as the U.S., China, and the EU are important
for Toyota.
• Reduces trade tensions and tariffs.
Good relations with the U.S. govern tariffs
and Toyota's operations there.

Economic Economic Stability: Competition

- Enables investment by Toyota in R&D, - Intense competition in the auto space from Tesla,
Factor manufacturing, and supply chains at low Ford, and BMW. Yen depreciation may help this
risk. to grow more in the US market.
- Japan has low economic growth along with Emerging economies, with fast growth, hold

20
 Japan Germany

deflation, hence affecting demand for potential markets for auto manufacturers.
vehicles. US Economy Growth
Currency values. - Growth in the US economy presents major
Yen Volatility Effect: opportunities for vehicle production and sales.
Toyota is exposed to yen volatility, a strong Pandemic Recession
yen increases export prices and - The pandemic hit demand and supply, but post-
compromises competitiveness. It narrows pandemic recovery presents a growth opportunity.
profit margins as overseas revenues translate Post-Pandemic Growth
into fewer yen. - The global economy is growing faster than pre-
Currency Hedging & Financial pandemic, offering Toyota opportunities to grow.
Strategies:
Toyota hedges the currency to stabilize
profits against exchange rate changes,
diversifying its production globally to lessen
the risks of yen fluctuation.
Weak Yen and Its Impact on Export
Competitiveness
A weaker yen lowers export costs, boosting
competitiveness and sales in major markets
such as the U.S. and Europe.
Commodity Prices & Supply Chain
Economics
Impact of Increasing Raw Material Costs:
Toyota's production costs vary with
commodity price changes. Rising raw
material prices can reduce profit margins,
leading Toyota to explore alternative
materials or suppliers.
Supply Chain Risks:
High impact production due to global supply
chain disturbances. Toyota's "just-in-time"
inventory is crisis-vulnerable

Technological Innovation and R&D Hydrogen Vehicle Overview

Japan is leading in technology and - It is crucial for Toyota's survival in the
Factor innovation, especially in automotive tech. competitive automobile market to launch hydrogen
Toyota invests heavily in R&D for cars.
autonomous driving, EVs, and hydrogen fuel R&D Commitment
cells. - Its R&D commitment has positioned Toyota at
Industry 4.0 the forefront of hydrogen cars.
• Automation and smart manufacturing Transition to Electric and Hydrogen
transform Toyota. Faster adoption of AI, - The future of the automobile industry lies in
robotics, and IoT would further augment electric and hydrogen cars, driven by innovation.
Toyota's manufacturing.
Partnerships
- Toyota is working jointly with technology
companies such as SoftBank to upgrade
connected car technology and autonomous
driving. Toyota takes the lead in future
mobility.

Social Factor Aging population. Shifts in Consumer Preferences

21
 Japan Germany

- Japan's aging population poses a challenge, - There is now a shift in consumer preference from
as older consumers may buy fewer new cars. traditional to eco-friendly cars.
Toyota must adapt with models for elderly Increasing Demand for Eco-Friendly Vehicles
drivers and target international markets. - Increasing demand for hybrid and electric
Urbanization vehicles allows car manufacturers to grow their
· Urbanization increases demand for small, environmentally friendly offerings.
fuel-efficient vehicles. Toyota can Market Change
participate in this trend with new design - The automotive market is changing quickly,
concepts for urban dwellers. prompting Toyota to adapt to new consumer values
Consumer Choices and behaviors.
- Quality and innovation are valued by
Japanese consumers, which shows in
Toyota's reputation. - Eco-friendly vehicles,
like hybrids, are in demand.

Environmental Sustainability Initiatives Cutting Carbon Emissions

Japan's environmental laws encourage - Toyota reduces automotive production's
factors sustainability. Toyota leads in hybrid tech environmental impact by introducing hydrogen,
(e.g., Prius) and is moving towards hydrogen electric, and hybrid vehicles to lower carbon
vehicles. output.
Climate Change Rules Sustainable Society Pledge
Japan has committed to the Paris - The company seeks to advocate for a recycling-
Agreement, which includes greenhouse gas based sustainable society that informs its practices.
emissions cuts. Toyota must innovate to cut Juridical Aspects
vehicle emissions and raise fuel efficiency. - Complying with labor, quality, and business
Natural Disasters: Disaster preparedness regulations will help it to operate smoothly.
and dispersed production are making Toyota Effects of Judicial Review
more resilient. Legal issues can hamper business operations,
affecting growth and productivity.

Legal factor Intellectual Property Protection Intellectual Property Rights

- Japan has strong IP protection laws that - Emphasis needs to be directed towards
benefit Toyota by safeguarding its
innovations in automotive technology.
the protection of IP: patents, trademarks,
Labor Laws- Japan’s labor laws require copyrights. Avoiding illegal use of
Toyota to comply with regulations licensing and maintaining a competitive
concerning employee rights, wages, and advantage in the US and Europe.
working conditions. Antitrust Law
Emission Standards
- Strict government regulations on vehicle
- Promotes free competition.
emissions align with global environmental - At the mercy of the FTC and the DOJ in
policies.These regulations compel Toyota to the US. The European Commission, in
continuously enhance its environmental Europe.
performance, particularly for hybrid and Labor Law
electric vehicles.
- Regulates the association between
employees and employers.
- While considering the legislation
protecting the rights of employees, fair
compensation, and safe working
conditions.

22
 Japan Germany

- Involves collective bargaining rights.

As shown in the table, Japan is considered a home market for Toyota, where the company has gained
huge success with its products. However, while selecting a second most appropriate environment
allowing further development and growth around the world, Germany may be worth
consideration. The following major influences might help Toyota come up with a more forward-
looking approach in Germany.
From the technological viewpoint, the German automotive market represents the third biggest in the
world currently and is developing at a tremendous pace, marked by sharp technological changes. This
fact creates a competitive environment for Toyota, therefore allowing the company to create and
improve its core products within a well-established marketplace. Traditionally, Japan has been defined
as the home market of Toyota; however, for recent times, it has been increasingly facing tough
competitors from local players. In light of these opportunities, Toyota needs to further enhance its
brand globally while continuing to hold its leadership position.

As for Germany's political factors, in light of the new situation, the current government is investing in
and promoting construction of a clean electric vehicle industry for automotive manufacturers. "We
are making Germany fit for the future as a location for car manufacturing and are ensuring that
there are good jobs along with digital expertise in the German automotive industry," said Minister
of Economics Peter Altmaier. The incentive programs of Germany can be accessed through a wide
variety of public funding instruments and also for a wide range of purposes. Such funding
requirements could emerge from investment projects, research and development, personnel
recruitment, working capital, or other specific objectives. Therefore, this creates a great incentive for
innovations in bettering its hybrid electric vehicle line. In the meantime, even though Japan also has
support programs for electric vehicles, the emphasis is not as pronounced as in Germany. Japan
focuses on the development of battery technology and hybrid vehicles.

Economically, from a product development perspective, the Ansoff Matrix places product
development as a secondary intensive growth strategy for Toyota. This helps in attracting customers
toward the new set of offerings. In this case, Prius was a revolutionary leap that helped the company to
support eco-friendly customer behavior. This approach of growth strategy complements the overall
competitive strategy of differentiation through producing products that are innovative and desirable
due to uniqueness or due to advanced technological features. The broad differentiation strategy deals
with creating uniqueness in the products or businesses to ensure sustainability over competitors such
as General Motors, Tesla, Ford, and BMW. Integration of these generic strategies strengthens the
competitive advantages of Toyota within global markets across each category. The current economy of

23
Germany is, therefore, quite better for automobile companies compared to Japan due to sufficient
government support, proper commitment for the transition towards greener technology and an
effective competitive market. In contrast, several economic challenges influence Japan and require
reforms for sustainable growth of the automotive industry.

German people are found to be quite eco-friendly. Simultaneously, they give major concern to high-
quality and durable products. It is here that Toyota has to align its products to meet the consumer
expectations in Germany. The vision of Toyota makes sure that "Mobility for All" turns into reality
and to have safer, more connected, inclusive, and sustainable vehicles. Thus, the mission of the
corporation is "Happiness for All." Due to the fast-growing hybrid and electric car purchases, it is a
great opportunity for Toyota to provide more products to this market segment. On the contrary, the
drop in demand for cars in the lower and middle-market level constitutes increased wealth inequality.
The German social factors appear much stronger to drive the consumption of vehicles, especially
electric, considering the high environmental awareness and supportive government policies in place.
The strong points of Japan are hybrid vehicles and technology, whereas changes in consumer behavior
could be at a disadvantage to the Japanese, especially in an aging population.When the voices against
climate change and the impact of pollution are louder than ever, Electric and Hybrid vehicle
development is no longer a fad but a need. Germany offers all the right support to the electric vehicle
industry in terms of policy and thus provides Toyota the best environment to bring its innovative ideas
into being. This encouragement by the government, added to high consumer demand, will create good
conditions for Toyota to develop more advanced products that will not only find their place in the
market but also enhance competitiveness on the global arena.Moreover, entry into the German
market will also help Toyota strengthen its brand and build up consumer trust by providing a
high-quality, durable, and environmentally friendly product. Establishing a foothold in one of the
biggest car markets worldwide will not only bring in economic profits but also further solidify the
image of Toyota as one of the leading companies within the global automotive industry.
In all, investing and developing in the German market is not a strategic choice but a must for Toyota
in order to affirm its global position in the automotive industry. It presents an opportunity for Toyota
not just to grow business but to contribute toward a sustainable future of the automotive industry as a
whole. This transformation will create long-term value, not only for the company but also for the
community and the environment.

V. Limitations.
1. Tariff barriers: Another ingredient is tariff barriers. These are something that any business must
endure when importing or exporting the products. This is an ingredient that really affects the price of
the product when sold on the market.

In Japan: According to "Wikipedia, 2024" The headquarters of Toyota are in Japan, and it is the
main and largest production center of Toyota. As noted by "Hoàng, 2022; From where does Toyota

24
import the raw material?, Quora, 2024", although having the most extensive network of factories,
still it has to import a huge number of components and raw materials from other countries in order to
feed the manufacturing processes. The imported products are important, such as semiconductors,
electronic chips, basic materials besides important components and spare parts. Major suppliers of
Toyota include China, Australia, and South Korea. Each country provides a different, vital source of
supply within the company's global supply chain. Even though Toyota still has to import the above
components and materials, Toyota still faces fewer trade barriers than when operating abroad.

In Germany: Because Toyota does not have a direct manufacturing plant, so it must pay a higher tax
rate than it must pay when manufacturing in Japan. Toyota supplies vehicles to the German market
through 2 ways:

1.Import complete units for products not produced at factories in the European market.

2. Import each component and will be assembled at factories in the European market.

With the first method, Toyota faces significantly higher tax rates. When a car is imported into
Germany, the company must pay customs tax at a rate of about 10% and value added tax (VAT) at a
rate of about 19%, both of which increase the cost of the product when it reaches the consumer
consumption. Not only that, but if Toyota imports vehicles with more than the standard CO2
emissions, the company also has to pay extra for the CO2 emissions tax. This is a special tax applied
in many countries of the European Union, which is supposed to spur the manufacturer towards
environmentally friendly solutions and reducing polluting emissions. In addition to taxes, the CBU
import method also increases shipping costs significantly, because shipping the entire vehicle from a
foreign factory to Germany is often more expensive than shipping just the parts accessory.

For the second method, Toyota will reduce delivery time and optimize transportation costs. According
to “European supply chain, 2024” products assembled in factories in the European market will be
considered products manufactured in the EU. This will reduce customs duties because EU members
are members of the EUCU (European Union Customs Union), members will enjoy tax exemption
when exporting and importing between member countries. Although still subject to VAT and CO2
emissions tax, reducing customs taxes also helps Toyota a lot.

-> The production and import strategy of Toyota reflects the flexibility of the firm before different
market conditions. In the case of Japan, having the largest headquarters and production center, Toyota
finally minimizes the trade barrier while still depending on component supplies from many countries.
Whereas in Germany, Toyota did not have any direct manufacturing plant and thus was obliged to pay
high importation tax on complete units with besides strict CO2 emissions regulations.However, it is

25
observed that Toyota has taken advantage of the method of importing only components for assembling
at European factories to reduce the customs duty obligation and optimize costs accordingly. This not
only helps the company save expenses but also gets its products to the consumer faster, meeting the
EU's environmental requirements. Based on this, Toyota can hold a competitive position and satisfy
international market needs in the best way.

2. Intense competition:

There is always fierce competition in all markets. Toyota has to compete with many big competitors in
both Asia and Europe. In Germany, Toyota has much fiercer competition than in Japan because there
are many cultural differences.

In Japan: The country has many big and well-known car manufacturers, so Toyota also has to
compete a lot in this country. Still stands firm in the automobile market of Japan with lots of
competitive actors inside and outside the country. According to "Statista, 2024", since it understands
consumer psychology, Toyota has developed, through its subsidiary in Japan, Daihatsu, a more
suitable line of minicars for consumers. The most obvious example is the Daihatsu Tanto Custom
whose square design allows maximum interior space comfort for the family while remaining compact
and suitable for urban space. Tanto also has convenient sliding doors that make it easy for users to
enter in and out of the cramped parking areas. Thanks to models such as Tanto and Mira, Daihatsu
help Toyota create a great competitive advantage in the Kei car segment, especially when facing
foreign car brands such as Mercedes-Benz, BMW and Audi into luxury cars and large size.The
company has been quite smart by now with its product development and diversification strategy
pertaining to it. It has included taking advantages of specialized car lines from its subsidiary Daihatsu
with which to dominate Japan's Kei car market.

26
According to the table of sales by automakers of minicars in 2023 alone, it is analyzable that Daihatsu
of Toyota makes the most number of minicars in Japan, with sales accounting for 565.93 million.
thousands of kei cars. Although Toyota still introduces and launches several kei car models under its
brand, the majority of kei cars sold are products of Daihatsu company.

In Germany: As a European country with many cultural differences, Toyota will have to compete
much more fiercely when operating in Japan because it has to face long-standing automakers. The
major competitors that Toyota must compete with when operating in the Land of Castles are BMW,
Audi, Ford, Mercedes-Benz, Volkswagen, etc. These are all long-standing and very famous
automobile companies. These car companies have a European design style, more suitable for
consumers in Germany. For example, BMW has different lines such as the BMW 3 series and the
BMW X5 in which, besides performance, it competes in luxurious design to meet customer
expectations that a car is not only transportation but also. A symbol of lifestyle. Another example is
Audi with Audi A4 model. This car stands out with modern design, elegance and advanced
technology, such as MMI infotainment system and advanced safety features, such as adaptive and alert
driving assistance systems and warning systems collide. It's more than just a plain sedan, Audi A4
offers an elite driving experience with a strong and predictable engine that attracts many buyers in
Germany, considering the people who do not simply want performance but also style and the overall
features of the car. The attention to design detail and finishing quality from Audi makes this model the
favorite choice in the mid-size sedan class.

27
Although highly valued for its quality and reliability, Toyota's market share in Germany remains very
low. One part of the reason comes from the consumers' loyalty to domestic products. Due to feelings
of domesticity and loyalty to German cultural values, many German customers tend to like either Audi
or Volkswagen. Moreover, the design of Toyota models, often in terms of pragmatic, is not
appreciated in the European market, where the design and style are taken seriously. Thus, despite the
fact that Toyota tries to improve and launch new models such as Toyota Corolla and Toyota RAV4,
they still can't overcome local rivals in such indicators as market and consumers' favor. According to
"What do people in Germany think of Toyota cars?, Quora, 2024" Toyota is highly unappreciated in
the European market. Because they have kept their own designs constant, their car products are not in
high demand compared to those of domestic car manufacturers and other Japanese and Korean car
brands.

Through Toyota's sales data table in each region over the years, we can see the stability of Toyota in
the German market. Toyota's sales in Germany have fluctuated slightly over the years. The period
2013-2015 tended to decrease, then increased rapidly in the period 2016-2017 and then tended to
decrease slightly in 2018. 2019 was the year with the highest sales of all years. However, it started
going down due to the COVID-19 pandemic for the trend of 2020 up to 2022. Sales in 2023 reached
90.1 thousand units sold, up 1.8% over the same period of last year. The sales amount seems quite
stable, but compared with other regions, this number remains very low.

-> It has been summarized that, in the fiercely competitive environment, both in Japan and Germany,
Toyota has been implementing various strategies to hold and increase the market share. Because of
this, it has had a deeper understanding of the consumer psychology and tastes in Japan, thereby

28
allowing it to take the lead in the mini car segment with Daihatsu's kei car products, especially in
competing with major European car brands in the domestic market. While in Germany, Toyota is in
more plight in comparison with other countries due to the existence of long-time European brands
dominating the market, becoming more suitable for consumer styles here. But in general, there is still
stability. The stability exhibits potential and determination to expand market share within one of the
most demanding markets in Europe.

VI. Conclusion.
From the analysis, Toyota Motor Corporation is a well-established company that enjoys a strong
brand reputation supported by superior technologies and a concern for sustainability. However, the
company equally experiences a number of challenges within the current market boundaries,
especially with regard to electrification, technological change, and regulatory pressures. Based on
the PESTEL analysis done here, Germany will be the best option for a long-term growth strategy of
Toyota due to its favorable technological, environmental, and social factors. Strong automotive
demand, high demand for eco-friendly vehicles, and favorable government policies-motivated
Germany is the perfect destination to expand its business. In such a country, Toyota will definitely
be able to exploit its strengths and opportunities to fulfill its goals and retain the top position in the
automobile sector.

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