How to Conduct a PESTLE Analysis for Business Expansion

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Information about Toyota

Toyota is an automotive company headquartered in Toyota, Aichi, Japan. The rapid development of companies at the global integration level makes it one of the world's most important economic sectors. It was set up in 1937, and presently the company conducts both domestic and global marketing, which helps in its expansion into around 52 overseas manufacturing companies in 27 countries. By considering the annual financial report of the company, it is analysed that its projections and forward-looking statements involve risk, uncertainties, and assumptions. By considering the financial position of the company, it is described that the business activities depend on the funds to conduct various factors, like market research, examining the different factors, and many more. A financial statement is a report that is prepared by the management of the company in order to describe its financial performance, which includes a balance sheet, an income statement, cash flow, and many more (Prokhorova et. al., 2016).

PESTLE Analysis for Toyota

It is a management tool that is used in order to analyse the macro-environmental factors or external factors. This examination is conducted in the context of companies, projects, or even countries (Klein, 2017). This analysis is conducted for Toyota, which is expanding its business in Germany, and also considers the factor of FDI. In this analysis, many elements are going to be examined, such as how many stores, distribution, hiring, offices, and many more. Toyota became the world's largest automaker, which is the main reason behind its expansion in Germany. Toyota runs its business across the entire world and includes the sale of its vehicles in Africa, Russia, and Australia. Various factors are discussed as under:

• Political: This dimension identifies the impact of government on firms and industries and puts emphasis on the protection of individual autonomy in a federal structure. It includes political stability, free trade agreements, and support of the government for eco-friendly products (Kobayashi, Hara, and Usui, 2017). Germany is a federal country with the Chancellor as the head of the government. Political factors and the environment of the country are both important aspects for Toyota and also carry risk factors that cause business losses or compromise its profit stream (PESTLE Analysis of Germany, 2019). Germany has recently faced political disturbance and considers immense changes in its leadership and also the shadow of Brexit in the country, which hurts the expansion of Toyota. By considering the future conditions of Germany, there is a hope to be leading Europe in the new era.
• Economical: These factors impact the development of the organisation and affect the economic conditions and changes in business. In terms of Toyota, the gradual growth of the economy and rapid growth of the developing countries are its opportunities. Germany has become the 4^th largest economy in the world with excellent GDP forecasts for 2019 and is set to the tune of $4.2 trillion, which looks set for husky economic growth. The economic growth of Germany boasts a low employment rate of 3.2%, which is one of the lowest worldwide employment rates (PESTLE Analysis of Germany, 2019). A low employment rate becomes an opportunity for Toyota to expand its business, which can increase its GDP and have a positive impact on the sales and profitability of the company. Germany has a mixed economy with a budgetary surplus and a strong economic foundation by which economic power gets established.
• Social: This factor considers the social and cultural factors which pertain to the impact of social trends on business. Increasing interest in hybrid and electric cars becomes an opportunity for a company, which helps in satisfying its customers. Because of the high economic standards and use of updated and advanced technology, Germany is considered one of the best countries as the nation has a moderate birth rate, which leads to a shrinking and largest elderly population (Liuhto, 2019). Considering it is a widely distributed country with a diverse lifestyle, the population majority is identified as Christian and around 19 million people come to Germany from a migratory background. The people of Germany are very punctual and have strong work ethics, which leads to hard work and an increase in their overall performance (PESTLE Analysis of Germany, 2019). While talking about Toyota, it becomes an opportunity and has a positive impact on the expansion of the company as they get excellent and valuable employees for themselves who have strong work ethics and very hard work.
• Technological: This factor determines the technical grounds or updates in technology, which can be examined by the research and development in the automotive industry. It includes many factors, such as the rising use of e-commerce and technology, which is used in mobile trends, which becomes an opportunity for the company. In terms of Germany, it is well known for its advanced technology on the grounds of science and technology. By considering the global report, Germany is 5^th most technologically advanced nation with expertise in many fields such as engineering, medicine, infrastructure and many more (PESTLE Analysis of Germany, 2019). The advancement of technology becomes an opportunity for Toyota in its expansion, which has a positive impact as Germany is also the leading nation in terms of information technology, artificial learning and machine learning.  
• Legal: This factor determines the various laws and regulations which impact the factors of the company, such as increased intellectual property laws, complex environmental laws and consumer laws, which can become opportunities for the company (Hoffman, Munemo and Watson, 2016). By considering the legal grounds in Germany, it promotes the establishment of business ventures, which is beneficial for both the citizens and foreign investors. In terms of Toyota, this factor positively influences the excellent investment environment of Germany, which helps in its infrastructure and structural reforms in its corporate taxes, which helps in order to attract many investors in the country.
• Environmental: This factor is concerned with the ecological elements and making strategic decisions and concerns the natural environment for business. Factors which impact the expansion of Toyota include climate change, declining oil reserves and increased emphasis on the sustainability of business. In terms of Germany, it has a negative impact because of the increased global warming and rapid changes in climate. Moreover, environmental pollution is rapidly increasing and the use of fossil fuels has prompted the nation to adopt the policy of promoting alternative energy sources (PESTLE Analysis of Germany, 2019). In the context of Toyota, this factor has a negative impact on the expansion of the company. Now, Germany is working its own way to sustain the resources in an appropriate manner and plays an important role in climate cooperation.

Porter's Five Forces in the Context of Toyota

This model is used to examine the external forces that impact the strategic direction of the company and also determine the various issues and challenges of an organisation, describe the top player in the success of the company, and represent the ability of the company. In the context of Toyota, it identifies the intensities or the strength of the external factors in the automotive industry. Various forces are mentioned as under:

• Competitive Rivalry: It describes the competitive forces that are present in the business environment, and this factor helps in determining how they influence it. In the context of Toyota, there are many automotive companies that are present in the market with the sort of innovation and best marketing strategies (Tsvetkova and Partridge, 2017). For this, the company needs to compete with many organisations that can differentiate through its cost, fuel efficiency, brand image, and other variables. By considering this factor, it is analysed that there are many players that are present in the market and have the same strategies in order to attract more and more customers towards them. In the context of Toyota, there are a lot of barriers in its success path because of the presence of many competitors in the market. The automotive industry is expected to achieve success continuously, which has a positive impact on the success of the organisation and the growth of the industry means that the competitors are less likely to be involved in competitive actions in order to capture the share market from each other. 
• Bargaining power of buyers: There are a lot of suppliers present in the automotive industry to operate the organisation and its production of the products. This means that the customers have few firms to choose from now and do not have much control over the prices. Hence, it makes the bargaining power of buyers more weak in the industry. Moreover, the product differentiation in the industry is high, which means that the purchasers are not able to find alternatives for the firm to produce a particular product and this difficulty makes the negotiation power weak in the industry (Levykin and Chala, 2018). Furthermore, the income of the buyers in the industry is low, which depicts that there is pressure to buy things at low prices and make the buyers more price sensitive. For this, the quality of the products is more important in order to make frequent purchases, which makes the buyers less price sensitive so the bargaining power of buyers is weak. In order to overcome this, Toyota focusses on innovation and differentiation in order to attract more buyers. For this, they can adopt product differentiation and quality of the products, which are important for the buyers and by using this, Toyota can easily attract a large number of customers.
• Bargaining power of suppliers: There are a number of suppliers present in the industry, not more than the buyers. This means that the suppliers do not have much control over the prices, which makes their bargaining power weak (Warren, 2017). The products that are provided by the suppliers are fairly standardised, low switching cost, and less differentiated, which makes it easy for the buyers to switch suppliers. It makes the bargaining power of suppliers more weak. Moreover, the suppliers do not provide credibility, which can become a threat to them as they carry forward their integration into the industry. This makes the bargaining power of suppliers lower. For this, it is important for the suppliers of Toyota to maintain relations with customers, which means that the profits are closely tied to the customers.  In order to overcome this, Toyota can purchase raw materials from suppliers at a very low cost. If the products or costs are not suitable for the company, then it switches its suppliers because of the low switching cost. For this, the company can have many kinds of suppliers in its supply chain as per the different geographic and demographic terms, which helps in ensuring efficiency within the supply chain.

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• Threat of substitutes: These are few substitutes that are present in the market and available for the products that are produced in the industry. The substitutes that are present are available at low profit in the industry, which means that there is no ceiling on the maximum profit that is earned in the industry (Di Matteo, Otsuki, and Schoneveld, 2016). By considering all the factors that can make the threat of the substitute of products weak in force in the industry. There are few substitutes that are available and are of high quality but also more expensive. By comparing it with other firms within the industry, they sell their products at a lower price than their substitutes with adequate quality, which means that the buyers are less likely to switch from the substitute products and it is concluded that the threat of substitute products is weak in the industry. In order to overcome this, Toyota focusses on providing high-quality products at low prices as compared to other ones.
• Threat of new entrants: By considering the economies of scale, it is quite difficult to achieve the industry as it requires a huge amount of capital and large capacities to achieve cost advantages, which is quite tough for the production costlier, which depicts the weak force (Storey, 2016). Presently, the company is using product differentiation, which is strong in the industry in which the company sells different products rather than standardised products. It becomes a strong emphasis on the advertising on the customer services as well. For this, the requirement of capital is high, which is not easy for the new entrants to establish their business as high expenditures need to be incurred. As all the factors are in the favour of the company, it can become a weak force or drawback for the new entrants in order to enter the market. If a company faces this, then it can tackle this by taking advantage of the economies of scale in the industry or fighting with the new entrants through its cost advantages. Moreover, they can also focus on innovation in order to make their products different and unique from the new entrant and spend on making marketing strategies in order to build strong brand identification, which helps them to retain their customers.

CONCLUSION

From the above discussion, it is concluded that business expansion is important for an organisation to earn more sales and increase its profitability. But expansion at the global level includes a lot of risk, which should be known by the company and to examine this, companies conduct a PESTLE analysis, which helps in examining the external factors and Porter's five forces, which helps in analysing the different forces of the environment.

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