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Introduction ................................ ................................ ................................ ........................ 02 A Brief Overview of Toyota Motor Corporation ................................ ................................ . 02 A Brief History ................................ ................................ ................................ ................... 02 Section LO1 - Organisation Purposes ................................ ................................ .................. 03 Purposes of different type of Organisation ................................ ................................ ....... 03 Stakeholders expectation and Organisational strategies ................................ .................... 04 Responsibilities of Organisation and strategies to meet them................................ ............ 05 Section LO2 - Nature of the natural environment ................................ ................................ 07 Economic system and resources ................................ ................................ ....................... 07 Fiscal and monetary policies effect on Organisation activities ................................ .......... 09 Competitor strategy ................................ ................................ ................................ .......... 09 Section LO3 - Organisational Behaviour in market environment ................................ ......... 11 Pricing and output decision ................................ ................................ .............................. 11 Market forces and effects for an Organisation ................................ ................................ .. 11 Business and cultural environment ................................ ................................ ................... 11 Section LO4 - Significance of global factors affecting a business ................................ ........ 13 International trade ................................ ................................ ................................ ............ 13 Global factors influence on a business................................ ................................ .............. 13 Summary and conclusion ................................ ................................ ................................ .... 14 Credits and references ................................ ................................ ................................ ......... 14


INTRODUCTION My aim in writing this assignment is to delve into the subject of Business Environment and describe its key functions. I have chosen to research and submit my findings based on the company Toyota Motor Corporation, and look into ways in which the subjects covered in this assignment apply to this corporation. A BREIF OVERVIEW OF TOYOTA MOTOR CORPORATION Toyota Motor Corporation commonly known simply as Toyota and abbreviated as TMC, is a Japanese multinational corporation headquartered in Toyota, Aichi, Japan. In 2009, Toyota Motor Corporation employed 71,116 people worldwide (total Toyota 320,808). TMC is the world's largest automobile manufacturer by sales and production.

There would hardly b anyone that does not recognize this l ogo!

Kichiiro Toyoda, The face behind the fame

The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a department of Toyota Industries, it created its first product, the Type A engine, and, in 1936, its first passenger car, the Toyota AA. Toyota Motor Corporation group companies are Toyota (including the Scion brand), Lexus, Daihatsu and Hino Motors, along with several "nonautomotive" companies. TMC is part of the Toyota Group, one of the largest conglomerates in the world.

Toyota Motor Corporation is headquartered in Toyota City, Aichi and in Tokyo. In addition to manufacturing automobiles, Toyota provides financial services through its Toyota Financial Services division and also builds robots. A BRIEF HISTORY Toyota started in 1933 as a division of Toyoda Automatic Loom Works devoted to the production of automobiles under the direction of the founder's son, Kiichiro Toyoda. Its first vehicles were the A1passenger car and the G1 in 1935. Toyota Motor Co. was established as an independent company in 1937.


SECTION LO1 - ORGANISATION PURPOSES Purposes of Different Types of Organisation An organisation is a social arrangement which pursues collective goals, which controls its own performance and which has a boundary separating it from its environment. Boundaries can be physical or social. For a company, Organisation or being organized is a means to achieve its goals, which are to create value for its stakeholders (stockholders, employees, customers, suppliers, community). The ultimate purpose of being organized in any which manner that is most feasible, is to generate profits. The different types of Organisation may be grouped into 3 main categories: 1. Sole trader / Partnership A Sole Trader or simply a known as a Proprietorship is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast with partnerships. A sole proprietor may use a trade name other than his or her legal name after filing a doing business as statement with the local authorities, whereas a Partnership is an arrangement where entities and/or individuals agree to cooperate to advance their interests. In the most frequent instance, a partnership is formed between one or more businesses in which Partners (owners) colabour to achieve and share profits or losses. 2. Private Limited Company A Private Limited Company, also known as Limited Liability Company (LLC), is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. LLCs do not need to be organized for profit. 3. Public Liability Company A Public Liability Company or Publicly Traded Company is a company that has permission to offer its registered securities (stock, bonds, etc.) for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter (OTC) via market makers who use non-exchange quotation services. A Public Limited Company (legally abbreviated to plc) on the other hand is a limited liability company that may sell shares to the public in United Kingdom company law, in the Republic of Ireland and other Commonwealth jurisdictions. It can be either an unlisted or listed company on the stock exchanges. Toyota is a public corporation and the company's shares are traded on the Tokyo, New York and London Stock Exchange[s].


Stakeholders Expectation and Organisational Strategies To be able to assess a stakeholder¶s expectations, and arrive at an Organisation¶s strategies to meet these expectations, we must first identify who a Stakeholder is. According to E. Freeman, a stakeholder is any group or individual who can affect or be affected by the achievement of the firm¶s objectives, and thereby whose support the business needs if it is to be successful. These people, in turn, have certain expectations from the company, and assessing the degree to which these expectations are currently being satisfied in a balanced fashion provides a valuable indicator of current and future performance. Stakeholders will almost always include the "big three": Customers, Employees, and Owners. For most commercial enterprises, these three are by far the most important, and the scope of the performance measurement is usually focused on them. In other situations, the scope may need to be broadened. Stakeholders should be clearly defined, particularly if there is any potential question of who is included or excluded in each group. In order for the Organisation to come up with strategies to meet such expectations, one of the key tenets is a balanced approach, and the awareness that over the long ru you cannot n, satisfy one stakeholder at the expense of another. Yes, customers are very important, but in the long run if your employees are disgruntled, they will not provide the levels of service necessary to satisfy the customers. Similarly, merely lowering prices to attract more customers may not be sustainable from the owners¶ viewpoint. The next step is to determine the expectations, or "satisfaction attributes," of each stakeholder. The most important aspect of this analysis is that it must be objective and factbased, not based on preconceived judgments or assumptions. The expectations of customers, employees, and owners need to be empirically verified by survey, focus groups, or through other methods. Many Organisations, including Acme, make the serious mistake of assuming they know and understand the stakeholders¶ expectations when in fact they do not. This is particularly true of employees: Senior management frequently assumes it knows what the employees want from their jobs, and they are often quite mistaken. Moreover, as the external world changes (e.g., competitors begin to satisfy more of the customer's expectations; other companies in the area offer improved working conditions; etc.), stakeholder expectations change.
Relations with Customers Addressing Diversifying Customer Needs Based on the "Customer First, Quality First" Policy

Global Society / Local Communities Toward Achieving a Sustainable Society and Being a Good Corporate Citizen

Relations with Employees Respecting Diversity and Developing Human Resources While Sharing the Toyota Way Globally

Relations with Shareholders Realizing Stable Growth

Relations with Business Partners Sustainable Society Achieved in Collaboration with Business Partners


In order to contribute to the sustainable development of society and the earth, Toyota believes that management emphasizing all stakeholders is of considerable importance, in addition to environmental initiatives. Toyota maintains sincerity in its actions, honours its promises and acts in a spirit of good faith in seeking to become a global enterprise respected by all peoples around the world, as well as working conscientiously to provide value to stakeholders through the business it conducts. In August 2008, Toyota revised its CSR POLICY: Contribution towards Sustainable Development that takes into consideration Toyota's relations with stakeholders. In addition to applying this policy to all of its consolidated subsidiaries throughout the world, Toyota expects its business partners to also support its principles. This section provides an introduction to Toyota's stance on responding to the diverse needs of its stakeholders, providing background as well as a summary of its past and present activities - both within Japan and overseas. Further details can be found by clicking on the links for each year's environmental report and/or by accessing detailed pages found within this site. Responsibilities of Organisation and Strategies to meet them Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media. An Organisation can fulfil its responsibilities towards its stakeholders, and implement strategies to meet them by paying attention to:

Responsive CSR (Corporate Social Responsibility) ± Being the good citizen: address a social issue that doesn¶t significantly affect a company¶s operations or competitiveness ± Mitigate harm from company¶s activities Strategic CSR ± Transforms key business activities to benefit society at the same time reinforcing the business strategy ± Significantly affects competitiveness ± Can include Responsive CSR


Toyota¶s CSR Policy: Contribution towards Susta inable Development TOYOTA MOTOR CORPORATION and their subsidiaries, take initiative to contribute to harmonious and sustainable development of society and the earth through all business activities that they carry out in each country and region, based on their Guiding Principles. Toyota complies with local, national and international laws and regulations as well as the spirit thereof and conducts its business operations with honesty and integrity.


In order to contribute to sustainable development, they believe that management interacting with its stakeholders as described below is of considerable importance, and they endeavour to build and maintain sound relationships with their stakeholders through open and fair communication. They expect their business partners to support this initiative and act in accordance with it. They also participated in the formulation of and observe the standards outlined in the Charter of Corporate Behaviour of the Nippon Keidanren (Japan Business Federation), an alliance of Japanese leading corporations.


SECTION LO2 - NATURE OF THE NATURAL ENVIRONMENT Economic systems and resources An economic system is the structure of production, allocation of economic inputs, distribution of economic outputs, and consumption of goods and services in an economy. It is a set of institutions and their social relations. Alternatively, it is the set of principles and techniques by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources. The economic system is composed of people and institutions, including their relationships to productive resources, such as through the convention of property. Examples of contemporary economic systems include capitalist systems, socialist systems, and mixed economies. "Economic systems" is the economics category that includes the study of respective systems. Today the world largely operates under a global economic system based on the capitalist mode of production. Following are some standards used to distinguish among economic systems. Let¶s analyze them, one by one: f Who owns the resources? Economic resources are the assets (things of value) which an economy (or business) may have available to supply and produce goods and services to meet the ever-changing needs and wants of individuals (in the case of a business) and society (in the case of society as a whole.) This can vary depending on the background and nature of the business, or the department being considered. For example, in financial accounting, assets are economic resources. Therefore, anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetary value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. Two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment. Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.


f What decision-making process is used to allocate resources and products? Each point along the economy¶s production possibilities frontier is an efficient combination of outputs. Whether the economy produces efficiently and how the economy selects the most preferred combination depends on the decision-making rules employed. But regardless of how decisions are made, each economy must answer three fundamental questions: What goods and services are to be produced? How are they to be produced? For whom are they to be produced? An economic system is the set of mechanisms and institutions that resolve the what, how, and for who questions. Some criteria used to distinguish among economic systems are (1) who owns the resources (which we have already seen above), (2) what decision-making process is used to allocate resources and products (which we have just discussed), and (3) what types of incentives guide economic decision makers (which we will see next). f What types of incentives guide economic decision makers? In economics and sociology, an incentive is any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way. Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different Organisations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to Organisational success. Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into three broad classes: 1. Remunerative incentives (or financial incentives) are said to exist where an agent can expect some form of material reward - especially money - in exchange for acting in a particular way. 2. Moral incentives are said to exist where a particular choice is widely regarded as the right thing to do, or as particularly admirable, or where the failure to act in a certain way is condemned as indecent. A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community.


3. Coercive incentives are said to exist where a person can expect that the failure to act in a particular way will result in physical force being used against them (or their loved ones) by others in the community - for example, by inflicting pain in punishment, by imprisonment, by confiscating or destroying their possessions. There is another common usage in which incentive is contrasted with coercion, as when economic moralists contrast incentive-driven work: such as entrepreneurship, employment, or volunteering motivated by remunerative, moral, or personal incentives - with coerced work such as slavery or serfdom, where work is motivated by the threat or use of violence. In this usage, the category of "coercive incentives" is excluded. For the purposes of this article, however, "incentive" is used in the broader sense defined above.) Competitor strategy A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. The first step to building a competitor strategy is to develop good competitor analysis habits. Competitor Analysis is an important part of the strategic planning process. We will now outline the main role of, and steps in, competitor analysis. But you may wonder, why waste time analysing competitors? Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes. Competitor analysis has several important roles in strategic planning: ‡ ‡ ‡ ‡ To help management understand their competitive advantages/disadvantages To generate understanding of competitors¶ past, present (and most importantly) future strategies To provide a basis to develop competitive advantage achievement strategies To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

Toyota¶s principal competitors are Ford Motor Company; General Motors Corporation and Honda Motor Co., Ltd. All organisations would do well to follow Sun Tze¶s defensive strategy: ³Do not assume the enemy will not come but be prepared for his coming« Do not presume he will not attack, but instead make your own position unassailable.´ Here are some questions to ask: Before embarking on a competitor analysis programme, it would be useful to bear the following in mind: ‡ ‡ ‡ ‡ ‡ ‡ Who are our competitors? What threats do they pose? What is the profile of our competitors? What are the objectives of our competitors? What strategies are our competitors pursuing and how successful are these strategies? What are the strengths and weaknesses of our competitors? How are our competitors likely to respond to any changes to the way we do business?


Sources of information for competitor analysis Davidson (1997) describes how the sources of competitor information can be neatly grouped into three categories: ‡ Recorded data: this is easily available in published form either internally or externally. Good examples include competitor annual reports and product brochures; Observable data: this has to be actively sought and often assembled from several sources. A good example is competitor pricing; Opportunistic data: to get hold of this kind of data requires a lot of planning and organisation. Much of it is ³anecdotal´, coming from discussions with suppliers, customers and, perhaps, previous management of competitors.




SECTION LO3 - ORGANISATIONAL BEHAVIOUR IN MARKET ENVIRONMENT Pricing and Output Decisions Pricing is the process of determining what a company will receive in exchange for its products. Factors involved in determining pricing structures are: manufacturing cost, market place, competition, market condition, and quality of product. Pricing is a fundamental aspect of financial modelling and is one of the four Ps of the marketing mix. The other three aspects of pricing are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being cost centres. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors. The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. Thus pricing is very important in marketing. The Mark-up rule is used in economics to explain firm pricing decisions. It states that the price a firm with market power will charge is equal to a mark-up over the firm's marginal cost, equal to one over one minus the inverse of the price elasticity of demand. A profit maximizing firm chooses the quantity of output to sell which equalizes its marginal revenue (the change in revenue from one extra unit sold) to its marginal cost (the change in total cost due to one extra unit produced). This results in the mark-up rule which captures the fact that the firm's ability to price its goods over cost depends on the extent of its market power. This in turn depends on the price elasticity of demand faced by the firm. Market Forces and Effects on Organisations Organisational structures, payment, and associated processes operate within the context of market forces, such as increasing managed care, incentive driven behaviour, and general market competition. Legislative, regulatory, and other public sector activities (e.g., decreased funding for Federal, State and local providers and regulatory and legal actions) interact with market forces to provide additional environmental effects on the health care system. Business and Cultural Environment PESTEL analysis stands for "Political, Economic, Social, Technological, Environmental and Legal analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro-environmental factors that the company has to take into consideration. The growing importance of environmental or ecological factors in the first decade of the 21st century have given rise to green business and encouraged widespread use of an updated version of the PEST framework. STEER analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and Regulatory factors.


Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labour). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.     


SECTION LO4 - SIGNIFICANCE OF GLOBAL FACTORS AFFECTING A BUSINESS International trade International trade is exchange of capital, goods, and services across international borders or territories.[1] In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is in principle not different from domestic trade as the motivation and the behaviour of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture. Another difference between domestic and international trade is that factors of production such as capital and labour are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour or other factors of production. Then trade in goods and services can serve as a substitute for trade in factors of production. Global factors¶ influence on a business Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy. a. Social factors - These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management. b. Legal factors - These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc.


c. Economic factors - These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations. d. Political factors - This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government¶s policy on the economy etc e. Technological factors - These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world. Summary and conclusion To summarize what we have analyzed in detail above, we can conclude the following: a. Businesses have distinct needs, mainly profits, and they thus employ various methods to achieve this without causing any harm or damage to any resources. b. While competition poses a serious threat to businesses, well organized companies that wisely invest in market research, find ways to turn these stumbling stones into stepping stones, creating more opportunities for themselves and their stakeholders. c. We consider the PESTEL analysis in the Business and cultural environments section which plays a pivotal role in the framework of macro-environmental factors used in the environmental scanning component of strategic management. Credits and references


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