Major Forces Impacting Toyota's Environment

Major forces impacting Toyota's environment

Introduction

The automotive industry in Australia, like many others, is a highly competitive market. Toyota is one of the world's largest motor companies, and is highly successful in the Australian market. To be successful and maintain profitability, Toyota must constantly monitor the external environment and respond to any changes. Several environmental forces impact on Toyota's environment, including economic, competitive, technological, sociocultural, legal/regulatory and political. They also have a major influence on Toyota's marketing strategies and initiatives.

The current global financial crisis, combined with rising fuel prices and ownership costs has resulted in a rapid decline of the automotive industry. Global vehicle sales are at their lowest level in a long time. There is also growing environmental awareness in the global community. This is reflected in widespread media coverage of climate change and global warming, and also in government policies. Consumers are concerned about the harmful impact of burning fossil fuels and the release of greenhouse gases on the environment. Toyota responded to this concern in 1997 by becoming the first company to mass produce a hybrid, petrol-electric car, the Toyota Prius. The Prius combines industry-leading fuel economy and environmental friendliness with cutting edge technology.

Toyota's strategies for the Prius are also influenced by some other forces. Sociocultural forces are the result of changes in people's lifestyles, attitudes the general makeup of the population. They affect buying behaviour and willingness to spend on certain products, so are crucial to understand. Toyota is targeting families and people looking to save on rising costs of car ownership.

Technological forces

Technology is the application of knowledge and creativity in solving problems and increasing efficiency. In most industries, capitalising on technological advances and coming up with new ideas usually leads to a company gaining a competitive advantage. Toyota's innovation led to it releasing the world's first hybrid car, the Prius.

There was growing concern over the harmful impacts of petrol cars on the environment. The burning of fossil fuels and subsequent release of greenhouse gases is believed to be contributing to climate change and global warming. Pressure was growing on auto companies to develop green, environmentally friendly cars. Toyota saw this as an opportunity, and responded to this concern by pioneering the world's first hybrid car, the Toyota Prius. Hybrid cars use a combination of electricity and petrol to power the motor. This results in vastly superior fuel economy, as the petrol engine is only used when needed - on highways and at higher speeds. They also emit lower greenhouse gas emissions which lead to global warming.

Leading the way in green motoring, Toyota released a new model of the Prius in 2009, one which is even more environmentally friendly and technologically advanced than its predecessor. It is powered by Toyota's revolutionary petrol-electric engine, the Hybrid Synergy Drive system. It has improved fuel economy over the older model - 3.9L/km, the lowest for any car in Australia. It also emits lower emissions - around 89g/km of CO2, a 14 percent improvement. Despite this, there is a 20 percent improvement in its engine performance.

The 21st century has been a time of rapid technological advancement. Not to be outdone, the new Prius also comes packed with cutting edge technology. The Solar Ventilation System uses solar panels embedded in the roof cools the cabin when parked during the day; the Multi Information Display provides instant feedback on fuel efficiency and power flow; and the Head Up Display projects speed and navigation information onto the windscreen in the driver's line of sight. There is also a remote air conditioning system, active cruise control and intelligent parking assistance.

Toyota markets the Prius with emphasis placed on its economy and environmental benefits. It is "Australia's greenest car", a claim backed up the Government's Green Vehicle Guide (2008). According to Toyota, customers can drive an "environmentally sound car without sacrificing space, comfort or performance". Furthermore the advanced technological features Prius help Toyota demonstrate that the Prius is worth the money.

Economic forces

Economic forces have a significant influence on how companies market their products, as they determine consumers' activities and buying decisions. Economic forces include the general economic conditions (the current state of the economy) and consumers' buying power and willingness to spend. These are affected by many factors such as the cost of living, interest rates and inflation.

Economic forces have had a major impact on Toyota's financial and marketing strategies. The world is currently in the midst of a financial crisis which stemmed from the collapse of US investment banks in 2008. This has severely affected the worldwide automobile industry, with global sales of cars rapidly decreasing in 2008-09. Toyota has been hit hard by the recession. It recorded a loss of almost $6 billion in 2009, its first annual loss in 59 years (The Wall Street Journal, 2009). Sales of Toyota vehicles in 2009 were down 15.1% on the previous year. In contrast to this, sales of the Prius actually increased; global sales reached the milestone of 2 million since its release (Toyota Hybrid Synergy Drive, 2009).

Fluctuations in fuel prices in recent years have heavily influenced the success of the Toyota Prius. In 2003, the price of oil was around $38/barrel. Petrol was relatively inexpensive, and sales of the Prius were just 292. A few years later in 2006, the price of oil rose to $100, and consequently Prius sales shot up to just under 2000. Then in 2008 the price of oil reached its highest ever point at $150. It resulted in a gloomy forecast with fears of supply shortage in the near future. Petrol prices soared to unprecedented levels as motorists in Australia were paying over $1.60 per litre. This delivered an extraordinary boost to Prius sales, with 3413 sold in 2008 (Goauto.com.au, 2009). Even as the price of petrol has slipped in 2009, sales of the Prius are still strong.

The cost of owning a car has also gone up a great deal over the years. A survey in 2008 revealed many consumers couldn't