Table of Contents
PESTEL analysis..............................................................................................................................1
Political factors.............................................................................................................................2
Economic factors..........................................................................................................................2
Social factors.................................................................................................................................3
Technological factors....................................................................................................................4
Environmental factors...................................................................................................................4
Legal factors.................................................................................................................................5
Porter’s 5 Forces...............................................................................................................................6
Bibliography.....................................................................................................................................8
Abstract
The strategic analysis explores the case of Toyota. The main purpose is to evaluate the external
environment in which the company operates. Therefore, a PESTEL analysis takes into account all
relevant factors which determine the macro environment. In addition, Porter’s Five Forces
analysis is used to assess the overall industry attractiveness and profitability prospects for Toyota.
PESTEL analysis
A PESTEL analysis is a model for examining the characteristics of the external business
environment. This also refers to the macro-environment in which a given business operates.
These factors are divided into six groups: political, economic, social, technological,
environmental and legal. The results obtained from the PESTEL analysis are often used to
identify the relevant opportunities and threats included in a SWOT analysis (Professional
Academy, 2015).
1
, Political factors
Political factors reflect the role of government in the economy. Elements, such as government
policy, political stability, tax and labour legislation, trade regimes, environmental laws, etc., are
included in the analysis (Professional Academy, 2015).
The global political landscape is very diverse. On the one hand, trade liberalisation and the
establishment of free trade zones (ASEAN, EU, NAFTA, etc.) promote trade by removing trade
barriers. Thus, globalisation supports Toyota’s expansion worldwide. On the other hand, political
instability (wars, political tensions, etc.) plays a major negative role that inhibits Toyota’s sales.
The quality of the political systems in each country also influences Toyota. In general, business
development is easier in countries with low level of corruption, institutional quality and
supportive business environment where taxes are low and labour legislation is more relaxed.
Economic factors
The economic factors are among the most important ones as they determine to a large extent the
overall profitability of a given business. The range of elements is very broad and it includes
economic growth, unemployment level, inflation and interest rates, disposable income, exchange
rates, level of government expenditures, taxation policies, etc. (Professional Academy, 2015).
There are plenty of economic factors that influence Toyota’s global performance. Some of the
factors are local and specific for each country, whereas others are global. The recent global
factors that promote Toyota’s expansion are the low inflation, falling oil prices, decreasing
unemployment and stable tax levels. Inflation rates are generally low in a historical perspective
and this stimulates the sales of vehicle. On the other hand, the slowdown in global growth can be
seen as one of the major risks for Toyota. This is particularly valid for developing markets where
Toyota achieves most of its sales growth. An economic slowdown in China, India, Indonesia or
Russia can substantially harm the company’s growth prospects.
It is also worth mentioning that Toyota is a Japan-based car producer and the value of the
Japanese Yen vis-à-vis other currencies largely affect the company’s profitability. Recently, the
Japanese Yen has weakened against the US Dollar and the Euro which improves Toyota’s
profitability from its overseas departments (Nkomo, 2014). This effect, however, is expected to
2
PESTEL analysis..............................................................................................................................1
Political factors.............................................................................................................................2
Economic factors..........................................................................................................................2
Social factors.................................................................................................................................3
Technological factors....................................................................................................................4
Environmental factors...................................................................................................................4
Legal factors.................................................................................................................................5
Porter’s 5 Forces...............................................................................................................................6
Bibliography.....................................................................................................................................8
Abstract
The strategic analysis explores the case of Toyota. The main purpose is to evaluate the external
environment in which the company operates. Therefore, a PESTEL analysis takes into account all
relevant factors which determine the macro environment. In addition, Porter’s Five Forces
analysis is used to assess the overall industry attractiveness and profitability prospects for Toyota.
PESTEL analysis
A PESTEL analysis is a model for examining the characteristics of the external business
environment. This also refers to the macro-environment in which a given business operates.
These factors are divided into six groups: political, economic, social, technological,
environmental and legal. The results obtained from the PESTEL analysis are often used to
identify the relevant opportunities and threats included in a SWOT analysis (Professional
Academy, 2015).
1
, Political factors
Political factors reflect the role of government in the economy. Elements, such as government
policy, political stability, tax and labour legislation, trade regimes, environmental laws, etc., are
included in the analysis (Professional Academy, 2015).
The global political landscape is very diverse. On the one hand, trade liberalisation and the
establishment of free trade zones (ASEAN, EU, NAFTA, etc.) promote trade by removing trade
barriers. Thus, globalisation supports Toyota’s expansion worldwide. On the other hand, political
instability (wars, political tensions, etc.) plays a major negative role that inhibits Toyota’s sales.
The quality of the political systems in each country also influences Toyota. In general, business
development is easier in countries with low level of corruption, institutional quality and
supportive business environment where taxes are low and labour legislation is more relaxed.
Economic factors
The economic factors are among the most important ones as they determine to a large extent the
overall profitability of a given business. The range of elements is very broad and it includes
economic growth, unemployment level, inflation and interest rates, disposable income, exchange
rates, level of government expenditures, taxation policies, etc. (Professional Academy, 2015).
There are plenty of economic factors that influence Toyota’s global performance. Some of the
factors are local and specific for each country, whereas others are global. The recent global
factors that promote Toyota’s expansion are the low inflation, falling oil prices, decreasing
unemployment and stable tax levels. Inflation rates are generally low in a historical perspective
and this stimulates the sales of vehicle. On the other hand, the slowdown in global growth can be
seen as one of the major risks for Toyota. This is particularly valid for developing markets where
Toyota achieves most of its sales growth. An economic slowdown in China, India, Indonesia or
Russia can substantially harm the company’s growth prospects.
It is also worth mentioning that Toyota is a Japan-based car producer and the value of the
Japanese Yen vis-à-vis other currencies largely affect the company’s profitability. Recently, the
Japanese Yen has weakened against the US Dollar and the Euro which improves Toyota’s
profitability from its overseas departments (Nkomo, 2014). This effect, however, is expected to
2
