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Unit 1 Business Assignment-Toyota
Diploma in Business
Unit Number and Title
Unit 1 Business Assignment Toyota
Business environment can be defined as the addition of numerous factors which are responsible for the success and failure of business organization. These various factors involve internal and external factors of business operations. This Business Toyota Assignment studies the understanding of organizational purpose of business, behaviour of market environment, significance of external factors and nature of national business environment with respect to global car manufacturer Toyota.
1.1 Types of organization and their purposes
An organization can be defined as the unit of people or group of people working together to achieve collective goals. There are various types of organizations involved in business activities; they can be divided as primary, secondary and tertiary sectors. Services, sales, ownerships, ownerships, etc. are the different purposes of organizations. Organizations working in different sectors have different purposes, for example, agriculture, mining, fishing, etc. are the activities associated with primary sector. Secondary sector include automobile production, textile production, etc. and the tertiary sector include entertainment, tourism, media, etc. In United Kingdom (UK), different types of organizations are working with different purposes (Arthur&Sheffrin, 2003). The four types of organizations in the UK are as follows:
- Government– There are various organizations that are owned by government. The legal entity such as state-owned entity, state-owned company, government-owned corporation, publicly owned corporation, etc. are created by government. For example, National Health Service (NHS, England), National Nuclear Laboratory, etc. are government owned entities in UK
- Charities- A charitable organization is non-profit organization that works for welfare of the society. There are different legal definitions of charitable organizations that vary according ot the country. In UK, the charitable organizations are exempted from taxation such as value added tax, income tax and capital gains tax. The advancement of education, religion, art, heritage and science, prevention of poverty, ill health, helps of those in disability, financial hardship, etc. are the purposes of charities. For example, Cancer Research UK, TEARFUND, etc. are charities working in UK.
- Co-operatives – A cooperative is an organization that is controlled and owned by people who use its products and services. The purpose of cooperative will be established by its members. Retailer’s cooperative, Consumer cooperatives, worker cooperative, etc. are the different types of cooperative. For example, MidcountiesCo-operative Society is one of the cooperatives in UK.
- Private limited – It is a type of organization that has following purposes such as maximize profit margins, generating highest possible revenue, increasing market share through sales maximization and to survive in competitive market. It is a company owned by private individuals and have limited liability on its directors and shareholders (Sawyer, 2004).
Toyota Motor Corporation which is a Japanese company and has engaged in the design, manufacture, assembly and sales of passenger cars, commercial vehicles, related accessories and parts. It is private limited company and working in multinational locations. The Business environment of toyota's main purpose is to generate maximum revenue.
1.2 Objectives of different stakeholders of Toyota.
Stakeholders – The individuals or group of people who are affected by the organization’s objectives, policies and actions are the stakeholders. Stakeholders are basically individuals or group of people who own a share in business. Stakeholders can affect the business, be affected by business and both affected the business and affected by business. Direct and indirect stakeholders are the two major groups of stakeholders in business organizations. Employees, customers, owners and shareholders are the direct stakeholders that directly impact the business (Peloza& Shang, 2011). Government, trade unions, competitors, etc. are indirect stakeholders that do not affect the business directly. Hence the list of stakeholders is:
- Managers & Owners
- Trade unions
Toyota motor cooperation has also developed various strategies to meet the objectives of its stakeholders. Company’s brand image, financial strength and human resource capabilities are affected by stakeholders. Toyota has recognized the significance of stakeholders and to address the interests of various stakeholders, the company maintains corporate social responsibility activities. Maintaining a strong position in global automobile market, Toyota continues to satisfy the interests of relevant stakeholders. Toyota’s attempts to meet the objectives of various stakeholders can be explained further as:
- Owners – These are the major stakeholders for the Toyota and have interest in business profitability. Toyota addresses the objectives of these stakeholders through focus on global business strength. Owners are involved in day-to-day business activities of Toyota.
- Employees – Toyota gives important to its employees and considers them as most important stakeholders. Toyota meets its employee’s objectives through satisfactory salaries, allowances and career development programs for advancing employees. For example, various training courses to career paths and On-the-job Development (OJD) program has adopted by Toyota.
- Customers – These are significant stakeholders that impact the growth and development of Toyota. Toyota has addressed the objectives of these stakeholders by providing high quality automobiles and services with reasonable pricing. Increased demand of vehicles and higher revenue of the company suggests that Toyota has successfully met the objectives of customers as stakeholder.
- Government – Toyota has regular discussions with government at various operational locations and perform its operational activities in comply with governmental rules and regulations. Toyota has fulfilled the objectives of government by paying corporate tax on a regular basis and obeys all the rules and regulations developed by the government of UK.
- Communities – As stakeholders, communities interest is their socioeconomic development. Various support and community development has been organized by Toyota toaddress the objectives of communities. For example, In UK Toyota has organized support programs for science and technology education (Sustainability data book, 2016).
1.3 Responsibilities of TOYOTA and the strategies employed to meet expectations of different stakeholders
Toyota has worked with various stakeholders such as employees, government, communities, customers, etc. Toyota’s corporate social responsibility activities have deals with various stakeholders and play a vital role to meet the responsibilities of various stakeholders. The various responsibilities of Toyota that has identified on its stakeholders are:
- Economic responsibilities
- Legal responsibilities
- Ethical responsibilities
- Environmental responsibilities
- Management responsibilities
Strategies to meet these responsibilities
- Economic responsibilities –Toyota is one of leading automotive company and it has committed to provide economic benefits to the stakeholders. Toyota’s responsibility is to produce goods and services and maximize profit for its owners and other stakeholders (COLLINS, 2010).
- Legal responsibilities – Organizations are expected to fulfil their economic goals within legal framework. Toyota has followed governmental rules and regulations and developed strategies to support automotive manufacturing industry in UK
- Ethical responsibilities – Respecting the rights of stakeholders and less to their problems are ethical responsibilities of business organizations. Toyota has managed effective business strategies and always pays attention to the problems of stakeholders.
- Environmental responsibilities – Toyota, through its corporate social responsibility address various environmental related problems. The company has fulfilled environmental responsibilities through Toyota Environmental Activities program and the company has also donated automobiles and funds for environmental conservation (Werther& Chandler, 2010).
2.1 Economic system and influence on TOYOTA
Economic system refers to the means by countries and governments distribute services and resources and trade goods. Distribution networks, production, organizing labour, etc. are the various steps and processes involved in economic systems. In the development and growth of any organization, economic system plays important role. As Toyota is Japanese company, economic system in Japan is different as compared to other countries where Toyota has developed its operational activities. Therefore different types of economic system haveaffectedthe progress of Toyota also. But Toyota has developed certain strategies to deal with various economic system adopted by countries worldwide. Before starting any business activities Toyota has analysed the whole economic system and governmental rules and regulations that affects its operational activities. The different types of economic system can be described as:
Mixed economy – This type of economies are the mixture of both public and private ownerships. Organizations can develop their business but need to comply on governmental policies. In a mixed economy, organizations have authority to develop their own business strategy but also need to follow labour regulation, consumer regulation, taxation policy, etc. decided by government. In order to allocate resources mixed economy is very effective because both government and organizations are equally involved (Schiller, 2011).
In UK, mixed economy system is used which benefits the automobile manufacturing facilities of Toyota also. In mixed economic system allocation of resources can be done effectively so Toyota get support from UK government to establish a manufacturing operation in UK. Toyota has established tow manufacturing plant in UK and also gives employment to number of people. So mixed economy system in UK has benefitted both Toyota and local citizens of UK
Free market economic system – In this type of economy system, the control of government is low and private sector has high control. Free market develops opportunities for organizations to produce new products and services. Organizations do not depend on government agencies and provides services and products when public needs. In free market economy, the main objective of any company is to make profit and sometimes organization avoid certain laws impose by government to achieve goals and objectives.
Free market system is also good for Toyota. The company can develop strategies and earn huge profits in free market system. The automobile manufacturing market has developed at rapid rate and there are various companies that established their manufacturing plant because of free market economy system.
2.2 Effect of monetary and fiscal policy of UK on Toyota
Fiscal policy – This policy can be explained as the ways through which government can adjust its tax rates and spending levels to monitor the nation’s economy. Fiscal policy determines central and local government spending, Public Sector Net Borrowing (PSNB) and Public Sector Net Cash Requirement (PSNCR).
Monetary policy – It can be described as the process through central bank, currency board or other regulatory committee determines the rate of growth of money supply which affects the interest rates. The objectives of monetary policy are to lower unemployment, maintain exchange rates with other currencies (Afonso& Sousa, 2012).
The United Kingdom’s economy is considered as fifth largest national economy in the world measured by gross domestic product (GDP) and it is comprised of 4 per cent of world GDP. In UK the service sector has dominated the economy and contributes to near about 78 per cent of GDP. The British economy is mainly impacted by oil and gas production and by the end of year 2014, the growth of UK is very good and rate of unemployment was decreased.
Impacts of fiscal and monetary:Fiscal policy affects the collective demand through changes in government spending and taxation. Employment and household incomeare influenced by taxation and government policies. On the other hand money supply in the UK economy is impacted by monetary policy which affects inflation rate and interest rates. Desire to make quality products are the reason of Toyota’s success both on international and Japanese market. The fiscal and monetary policy has impact Toyota’s business activities. When government increases corporate taxation then Toyota revenue has affected. The increase or decrease in interest rates in UK has impacted financial stability of Toyota (Hall, 2012).
2.3 Effect of competition policy and other regulatory mechanism on Toyota
Competition policy– UK competition policy can be defined as the ways by which government promote competition in the market and developed competitiveness of UK business within the European Union single market. The main of competition policy is to ensure:
- Effective price competition between suppliers
- Widening consumer choice
- Development of technology innovation to increase efficiency (Rubalcaba, et. al., 2010)
Impact of competition policy on Toyota activities
The government of UK has developed competition policy for the efficient working of markets. As Toyota is engaged in automobile sector and there are also other competitors in the market which give tough competition but with competitive policy other companies do not exploit their monopoly power by charging high or low prices. Competition policy aims to provide fair competition in market for all companies, Toyota UK has worked successfully because of competition policy. UK government wants to develop the manufacturing sector so the government has encouraged Toyota to develop more operational activities. The UK wants that Toyota would give employment to local community and helps to raise the standard of living in the remote areas (Damro, 2012).
3.1 Market structure determine the pricing and output decision
Market structure can be defined as the characteristics which move the buying behaviour in the market and change interaction of business. These characteristics can be the product type, conditions for entry or exit, transparency, quantity and volume of sales. There different types of market structures such as monopoly, oligopoly, perfect competition, monopolistic competition and duopoly market structure. The two types off market structure are explained below:
Perfect competition- Perfect competitive market denotes no influence over the prizing in the market by any participant. There is no barrier to entry for buyer or seller and the information has a free flow. The buyers and sellers both seek to increase their profit margins and have free access to the market entry and leaving. The information regarding the products such as quality, quantity and availability is available to everyone. These types of market structure can be observed in agricultural trades of wheat and corn. There are a large number of buyer and sellers and product is homogeneous with no price taker.
Monopolistic competition- The monopolistic competition is the marketing structure which produces differentiated products. In other words the producer changes the product slightly in order to maximise their profit. For example retail sector which has similar product but not a perfectly substitutable product. The monopolistic competition provides independent decision making and free entry and exit for the long run of business. The buyers and sellers have all the relevant information regarding the products and the differentiation creates a diversified product range.
The market structure is responsible for the pricing in business organization and its output decision. The pricing and output decisions are based over the competitiveness of the market. If the market is highly competitive in nature then the pricing and output decisions are governed by production capacity and market traits. While in a less competitive market the pricing and output decisions are based over the business organization itself (Wetherlyand Otter, 2008).
3.2 Market forces shaping organizations response
Market forces are the effects which causes change in the price of goods and services on the basis of supply and demand in the market. The price of goods and services are inversely proportional to demand in the market. So, if the demand of a product is increased, the prices will relatively increase and if the demand of the product is decreased, then the price of the product decreases subsequently. There are number of market force factors which can alter the pricing such as demand & supply, price elasticity, porter’s five forces and price decisions. The two types of market forces are explained below:
- Supply and Demand- Supply and demand is the price determination model in business economics. It emphasis it’s concentration over the quantity of product for supply and quantity of demand in the market. The supply and demand force is concluded over the competitiveness of the market. This means that the economic equilibrium of price and quantity can be achieved with the quantity of goods and the want of the good in the market.
- Price decision- The price decision can be explained as, it is the measure of establishing the price of a product. The pricing decision is done with covering all the initial cost of manufacturing with profit margins. It can be decreased with lowering the input cost or the production cost of goods and services. A review system is present in the price decision where the market demands, cost dynamics and competition is reflected to alter the pricing. Also, the price decision assures sales for the business organization. The pricing decision has internal factors which influence pricing such as market share, market profit, returns on investment and marketing objectives. And the external factors affecting pricing decisions are government regulations, customer expectations, elasticity of demand and competitiveness (Worthingtonand Britton, 2009).
The impact of market forces over the business of Toyota can be explained with porter’s five force analysis explained below:
- Competitive rivalries of Toyota (Stronger force): Toyota is in automobile manufacturing and deals with lot of competition on a global level. Thus competition is a strong force which depicts the pricing strategy of the products and services of the company.
- Customers have bargaining power (strong force): The customers are the king in any market and Toyota is directly based over the influence of buying behaviour of its customers. If the pricing of the product will not suit its customers they can move over to any other company. Thus company needs to provide information to their consumers regarding the products and services to target its customers.
- Suppliers have bargaining power (Weak force): The suppliers of the company have a moderate population and the high availability of suppliers in automobile industry led the bargaining power of supplier as a weaker force as compared to other forces.
- Substitute product in market (Moderate force): Toyota has a strong brand value and a specific target audience, company can rely over them. But there are chances of changing business environment with shifting of consumers towards substitute products as well. Thus, it is a moderate market force over Toyota.
- New entry of competition (Weak force): Toyota has achieved its organizational success to a limit that it has a competitive edge in the market. Thus, in a car manufacturing industry new entrants pose weak threat to a global car manufacturer like Toyota (Donaldson and Farquhar, 2012).
3.3 Business and cultural environment or business organization
The business and cultural environment of Toyota can be explained with the environmental analysis of the company. The environmental analysis of Toyota can be explained with the following PESTLE analysis:
Free trade agreements
Eco-friendly products have governmental support
Currency difference between Yen and dollar
Gradual growth in mixed economy
Rapid increase in demand in UK
Hybrid cars are favoured
Electric cars have public interest
Rise in use of mobile tech
E-commerce market increased
Intellectual property laws are improving
Complex consumer laws
Increase in environmental laws
Climate change increases hybrid cars
Declining global oil reserves
Business sustainability increasing
4.1 Discuss the significance of international trade to TOYOTA UK business.
International trade can be explained as the exchange of products, services and goods across the international borders. In most cases the manufacturing of the goods takes place in another country and it is consumed or sold in another country thus completing the entire process of international trade. International trade is very significant for any country and company for their business and Toyota is no exception in that. Toyota has annual revenue of more than 230 billion USD and 75 percent of that revenue comes from international markets for Toyota. Their home market that is Japan is already a saturated market in terms of automobiles and there is stiff competition among players like Honda, Toyota, Suzuki etc making the market very stiff and little room for maneuvering. International markets and trading is the only available market for Toyota where it can grow and adapt itself with the changing needs of markets.
In markets like UK Toyota has a strong presence and a significant revenue share because UK is a developed and industrialized market with a healthy demand for its product round the year. UK is not just a single market for Toyota but it is a portal for their entry into entire European Union market because UK has the infrastructure and ability to handle large imports and exports and also acting as a financial capital of the western world. Thus presence in UK is very significant for Toyota as it gives them control over the entire EU market.
Presence of companies like Toyota in UK has its positive and negative impact on local businesses of UK. Toyota UK is responsible for sales, marketing and services of all Toyota vehicles and Lexus vehicle and it is generating more than 20000 jobs in UK directly and indirectly. They are making a contribution to the local economy by paying taxes for their business and generating various auxiliary services needed but in the longer run they are hampering the ability of local business to cater to the automobile needs of their population and being a MNC company would eventually take out their profits to their head offices from regional centres like UK (Schuster & Keith, 2004),
4.2 Analyse the impact of global factors on TOYOTA UK business.
The term Globalization represents union of the entire world’s culture. Thus globalization has led to the integration of the world views be it in terms of goods and services or be it the geographical shift of the production poles in order to satisfy the needs and wants of the customers. The meeting of marketing ideas, products, services, consumer behaviour is one aspect of globalization other aspect is that it is creating an ever increase in the difference of income between the rich and the poor worldwide. Transition and globalization has got a major impact on the global economy (Cannella, 2010). Rapid progression in the transition and full contribution in the global economy enables countries around the world to grab new opportunities and garner its benefits.
Technological development in field of IT and IT enabled services is one of the biggest drivers of globalization because it is ensuring a real time communication and connectivity between different work centres around the world and ensuring that business can be managed from remote locations as well. Services have the problem that they cannot be stored and they need to be consumed at the same time when they are produced and this can be done using IT services. Now services can be generated in a low cost country of world and it can be consumed anywhere in world.
Second driver of globalization is the development of supply chain management and logistics management. A global supply chain management is connected with the entire business world to develop their procurement procedure and distribution strategy. A global supply chain model is adopted by many organizations or large and midsize who are looking for a competitive presence in market. Benefits associated with global supply chain management are cost effectiveness and a reliable supply chain which will ultimately give the organization a sustainable competitive organization and dominance in market because of having an advantageous feature in the operational process of the company. Both IT services and Supply chain can make an impact on Toyota’s business operations. Supply chain can ensure that manufacturing can be done in locations where it is feasible for company and then ship them to the markets like UK. on the other hand IT can ensure that all activities of the company well-coordinated.
4.3 Evaluate the impact of policies of the European Union on TOYOTA UK business.
European Union is politico economic union of 28 members of the state which are primarily located in Europe. EU is formed with the logic of developing a unity between different member states of European region and creating a harmonious environment by opening borders for each other and maintaining same level of taxation and adopting similar currency for exchange (Stank, et al. 2011).
Toyota UK as a business has a huge impact because of European Union and its policies. One of the biggest advantages of having EU union for the entire 28 countries is the fact that they have similar business regulations, norms and policies for companies with headquarters outside Europe. This way Toyota would not have to develop different business policies for each market of Europe. Country wise markets are small in Europe and it is not worthwhile for a company like Toyota to cater to each of them individually, however making an entire EU provides a huge business market for the company and helps them gain the required business growth. No difference in taxes and levy in the neighbouring countries also reduce the competition from companies operating in different markets.
European Union as a market has much stringent emission norms called EU emission norms which are very tough for companies like Toyota to follow in every market. Some of the countries which are a part of EU like Greece do not have the required infrastructure and economic strength to support the requirements of EU fully and companies have to follow the rules in these markets which are not ideally suited and required for them. For example the emission norms, minimal wages and work hours related norms which are applicable Denmark considering its general climate cannot be same as that of required in Greece but being a part of EU makes them all follow the same norms (Jamal, 2003).
It is concluded that this assignment has focused on the organizational purpose of business and also analyse the various stakeholders of Toyota and its strategies to meet the objectives of different stakeholders. The assignment explained behaviour of organizations in their market environment and also assess the importance of global factors that shape the national business activities. The report has presented different strategies used by business organization and the main focus of report on case study of Toyota.
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