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This report consists of a strategic analysis of the current corporate and business strategies of Toyota. The aim is to asses the trends likely to affect Toyota as a company in the near future and from this make suggestions for changes and identify new business opportunities. More specifically this part of the report will be an analysis of the external environment and how current trends and external threats will impact the business. The environment in which a business operates is an external influence and it is therefore not possible for Toyota to control. This makes the environment a source of threats and it is therefore essential that managers analyse their environments to attempt to predict and influence environmental change. Firstly I will look at the key trends that are likely to affect Toyota over the next decade. For this I will look at the macro environment and use PESTEL analysis to identify how the different components might affect the organisation. Looking at the car industry there are a number of current trends emerging from this market that will affect Toyota. From a political point of view the regulations and acceptable standards on the creation of emissions are tightening. Specifically in Europe which is one of Toyota’s largest markets the EU commission intends to define even more stringent emission standards. If this is adopted it will become mandatory around 2014 – 2015. This is one of the most important and topical trends in the car industry at the moment and will therefore have large implications for future production and business strategies at Toyota. The current economic climate is also an important trend affecting the car industry. The recent economic slowdown has hit Japan, US and Europe which are the areas that generate the largest revenue for Toyota. As a result of this weak economic growth the car industry is expected to decline. This is a direct result of customers having less money to spend and increased fuel prices meaning people are looking for cheaper alternatives to commute. From a social perspective the most important trend is the change in social attitudes towards having greener more environmentally friendly products. The car industry and therefore Toyota has been specifically hit by this and it is therefore important to maintain an image that promotes this. Advances in technology means Toyota have to continually invest in R&D to maintain competitive. This is particularly important as they operate in a global market that has expanded even further recently with Chinese made vehicles being exported for the first time. Research and development activities at Toyota focus on the environment, vehicle safety and product development. This enables them to build a large vehicle portfolio and will improve their competitive strength. An example of this is the development of the hybrid fuel cell in 2008. Environmental factors include climate change and pollution. The most prominent trend under this category is global warming which includes changes in temperature. In the current environment there is a much greater environmental awareness of the occurrence of global warming and it has therefore become an important issue for Toyota to consider. The negative impact on the environment can be reduced by looking at the reduction of pollution and waste in both the production process and in the usage of the final product A recent trend that had legal implications for Toyota is the recall of over 8.5 million cars globally in 2008 because of safety issues. As well as having many legal implications this trend negatively impacted the reputation and brand image of Toyota. Other trends include things like hybrid and electric cars gaining market share as well as the changes in consumer requirements for example the increased demand for smaller cars and the demand for wireless information systems in cars. All the above key trends are likely to affect Toyota over the next decade and this means changes need to occur in the business strategies to reflect these. Having considered the trends in the car industry I will now investigate the threats that Toyota will face emerging from the environment. While doing this I will consider the five forces framework to look at the attractiveness of the car industry in terms of competitive forces and their potential to change. Firstly I will consider the threat of entry and to what extent barriers can be overcome by new entrants into the market. The car industry as a whole can be seen as having low entry barriers and this is therefore a large external threat to Toyota. Customers tend to have low brand loyalty and the products provided are not unique. This means that any new entrant can be an attractive proposition for customers and will result in Toyota losing market share. Although initial start up costs can be high, access to inputs is easy and economies of scale are minimal. This further reduces the barriers to entry. Leading on from this a second major external threat is the threat of competitors. As with all car manufacturers Toyota has large competitive rivalry in the car industry. Competition is also continually increasing; this is due to easy access for new entrants as discussed above and competition increasing from international markets. I will now discuss the threat of substitutes. A substitute is any product or service that offers a similar benefit to that of a car. Substitutes reduce demand as customers switch to alternatives and are therefore a threat to the car industry and Toyota. Substitutes in the car industry are alternative means of transportation or other ways to commute. A large continually increasing example of this is public transport. With this service improving and the cost of fuel and car maintenance increasing this has become a very attractive and popular substitute. As a result this is a large external environmental threat to Toyota and means it is essential to promote the necessity of cars and the convenience that they provide. A further threat emerging from the environment is the cost of fuel. As a result of increasing prices of oil the cost of petrol used to power Toyotas cars is rising significantly and therefore reducing the attractiveness of Toyotas products to customers. This also increases the threat of substitutes as discussed above. The power of suppliers is also a very important environmental threat to the car industry. Suppliers supply the organisation with what is required to produce the product or service. In terms of the car industry this is most important when looking at the supply of oil, raw materials and equipment. The industry is highly vulnerable to movements in the price of raw materials such as rubber, steel and fuel. This is a significant threat to Toyota as any changes in the terms set by suppliers can be very damaging and with highly concentrated suppliers the buyers (Toyota) do not have much power. Toyota experiences an external threat as a buyer; they are in a position where they cannot supply themselves as certain materials require high expertise. The supply chain as a whole also is a threat to the car industry. The car industry is at risk from the possibility that suppliers will fail as a result of the poor economic conditions. This will have a detrimental affect on Toyota as a buyer. However they can benefit in terms of low switching costs, by operating in an industry where differentiation is weak switching costs will also be low. Having identified the current trends and threats to Toyota from the external environment I will now go on to discuss what changes should be made to the corporate and business level strategies of the company to reflect these trends. Firstly I will look at the increasing price of oil and what strategies can be developed form this threat. The car industry is faced with a huge threat to its survival as a result of increasing fuel prices and it is predicted that this will continue to increase into the near future as a result of high demand and concerns over emissions created when supplying this. These issues have created a severe threat to Toyota’s core business as a car manufacturer. Toyota can predict that these higher costs and changing customer attitudes will damage sales. To maintain successful in the long run, corporate business strategies need to change so that this is taken into account. The challenge for Toyota is acknowledge this potential threat and change their strategy to meet the needs of future customers. Toyota has already recognised this and in response has set up a group with the aim of creating a vehicle which will work within the restraints of the natural resources and environmental issues. Toyota has used hybrid technology to produce the first eco-efficient vehicle, the Toyota Prius. This is a concept which is becoming more and more important and is therefore a business strategy that needs to be developed and invested in further. As mentioned above another important trend which links in with the development of the eco car is the importance of operating an environmentally friendly company. Society now demands that companies actively develop strategies to ensure they are less damaging to our environment. From Toyota’s perspective this includes the production process as well as the finished product. The business level strategies that Toyota therefore needs to implement include looking at ways to reduce waste, cleaner manufacturing, recycling and promoting zero emissions. Although these may be more time consuming and less cost efficient for the production process it is an essential strategy to maintain a good image and stay within legislation. The threat of competition and the risk of low entry barriers particularly form developing international manufactures can be reduced by changing business strategies to focus on targeting the strategic customer. Strategic customer Critical success factor I will now discuss the specific opportunities to be pursued from the strategies discussed above. The critical issue is the implications that can be drawn from this new understanding and how this can guide strategic decisions and choices. Using the environmental analysis I will identify opportunities for the organisation this can then be valuable when thinking about strategic choices for the future allowing Toyota to take advantage of the best opportunities. Strategic gap