PESTEL IN TOYOTA COMPANY
Introduction
Toyota Motor Corporation has its headquarters in Aichi, Japan and it was founded in August
1937 by Kiichiro Toyoda. It’s among the largest companies globally according to its revenues
and market capitalization.
In the financial year that ended 2013, Toyota Motor Corporation posted a profit of $8.21 billion
with a market capitalization of $190.48 billion. The beta and EPS for Toyota were 0.78 and
10.62 respectively while its shares were trading at $120.07 as on November 19 2014.
PESTEL refers to the analysis of a company’s external factors which include the political,
economic, social, technical, environmental and legal factors. (David 2009)
The following are the PESTEL factors that affect Toyota Motor Corporation;
Political
The political factors that affect Toyota mostly stem from the external markets like North
America where its revenues by segment are the greatest. The US government has moved to pass
legislation that requires the automotive industry to optimize the efficiency of fuel consumption in
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vehicles in order to reduce the CO2, NC and HC emissions in vehicles. These factors have
increased the manufacturing costs of vehicles as more research has to be undertaken.
Economic
The recent economic crisis in the year 2008 resulted in a lot of losses for Toyota Motor
Corporation especially the North American segment. The American GDP and employment levels
dropped while the unemployment rates increased dramatically. Sales revenues during this period
dropped to very low levels. (Johnson, Scholes, Whittington 2008)
34%
37%
14%
8%7%
Toyota Sales by Segments
JapanNorth AmericaEuropeAsiaOthers
Source: www.toyota.com
Social
The current social-cultural attitudes rotate around the green vehicles and the electric powered
plug-in vehicles. Toyota has introduced the Toyota Prius plug-in electric hybrid vehicle that has
generated a lot of interest in social circles as a favorite green vehicle that conserves energy and
its use is safe to the environment. Most companies are also opting to work through the internet
with flexible working hours to avoid overcrowding. These reactions have limited the sales of
Toyota Motor Corporation.
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Technological
Toyota has introduced the hybrid electric vehicles that utilize the latest technology to conserve
energy and maintain a safe environment that’s free from pollution. The hydrogen fuel cell is also
a new technology that drives the modern FCHV Toyota motor series. These advances have
improved Toyotas efficiencies in fuel consumption.
Environmental
To conserve the environment and in effort to curb the global warming and the green house effect
the American government has moved to pass legislation that requires the automotive industry to
optimize the efficiency of fuel consumption in vehicles in order to reduce the CO2, NC and HC
emissions in vehicles. Toyota Motor Corporation has to follow the American policies as its
largest segment by revenue is the US market. Toyota has manufactured vehicles that are
environmental friendly like the Rav4 Ev and the Toyota Prius. Toyota has an Eco Vehicle
Assessment System which assesses the impact of the production process of the vehicle, usage
and its disposal to the environment. Toyota also promotes the protection of national parks in the
US through donations.
Legal
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Toyota has been affected by the laws on environment that require the reduction of CO2 and NC
emissions from vehicles that are being sold in North America. These requirements have added
additional costs to the Toyota brand of vehicles.
Finally, in comparison to GM, the sales and market capitalizations of Toyota Motor Corporation
are higher but GM has a higher Price Earnings (P/E) ratio of 20.74 compared to Toyota’s 11.32.
The PESTEL external factors are more favorable to GM than Toyota while Nissan has a P/E
ratio of 10.33. (Rothaermel 2012) The other factors that may be contributing to the favorable
PESTEL for GM is that it’s an American Company that’s based in the US while Toyota is a
Japanese company.
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References
David, F.R., 2009, Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall, 104-
114
Johnson, G, Scholes, K. Whittington, R., 2008, Exploring Corporate Strategy. 8th ed. FT
Prentice Hall, 55-57
Rothaermel, F. T., 2012, Strategic Management: Concepts and Cases. McGraw-Hill/Irwin, 56-61
