PEST analysis of Toyota Volkswagen and Chevrolet

Document Type:Thesis

Subject Area:Social Work

Document 1

This method of analysis enables the leaders of a company to determine the risks and opportunities available for mitigation and exploitation, respectively (“PEST Analysis”). The organization is then able to align its internal capabilities with the realities of the external environment in order to succeed (“PEST Analysis”). PEST in general PEST is an acronym: P stands for Political factors, E for Economic factors, S for Social factors, and T for Technology (Gupta). Political factors Political factors to consider in the external environment include, but are not limited to the type and state of government (stability or instability), existing laws such as those governing employment, consumers, the environment and other operational laws (PESTLE Analysis). Other factors include taxation policies, trade policies such as trade restrictions and tariffs, leadership of Government, levels of corruption, issues of bureaucracy and the stability of neighboring nations (PESTLE Analysis). Economic factors Economic factors include world trade patterns (Gupta), currency exchange rates, interest rates, commodity prices, current economic growth patterns, inflation, the supply of labor, and other industry-specific factors (“PEST Analysis”). Other economic aspects that may be considered include taxes and customs duties, access to finance and credit, the cost of living, globalization, and economic indicators such as the Gross Domestic Product (GDP) and Gross National Product (GNP) (PESTLE Analysis). Social factors Social factors to be considered are those that have an impact on the company’s market. Examples include lifestyle trends, cultural and social conventions, religious beliefs, education and career trends, demographics, attitudes and beliefs about health and the environment, age distribution, employment levels, and population growth rates (PESTLE Analysis).

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Technology Technological factors to be considered include research and development, automation, the rate of technological changes, innovation, and consumer interest in new technology coupled with the organization’s ability to invest in such new technology (“PEST Analysis”). Tax reforms, immigration and health reforms have also been instituted by Trump’s government (Prins). As a result of the trade wars with China, the Trump administration has proposed tariffs on several items imported from China. This includes steel, upon which tariffs may apply if imported from other countries such as Mexico, as well (Prins). Tariffs on steel directly affect the businesses of automobile makers such as Toyota. Whilst the US Government intended to protect the jobs of local steel workers with this move, it has the effect of increasing production costs for automobile manufacturers who have assembly plants in the US.

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Apparently, fewer cars are imported into the US from China than are imported from China into the US (Ell). This therefore presents the threat that US automobile companies will lose the Chinese market were China to retaliate in imposing similar measures. Another trade related political aspect to be considered includes the uncertainty of doing business in and with the US under the existing circumstances. The actions of the Trump administration with regard to China and the European Union have led to uncertainty for investors. It is not just the trade wars that are a source of uncertainty, but the political atmosphere of the US as well. Without universal health care, it becomes very expensive to offer this employment benefit unlike in some countries such as Canada and Mexico where healthcare is much cheaper, universal and managed by the government (Kiley).

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Toyota may therefore consider if it would rather set up more factories in such countries or even fold up some factories and move them to those other countries if the cost-benefit analysis make it a sensible thing to do. According to Kiley, it is hard to make any margins on the sale of small cars in the US because the cost of labor and especially the provision of health insurance is a major cost for automobile manufacturers. Another thing that Toyota may consider with respect to America’s health policies is whether to lower its health insurance benefits for employees. I am not sure whether there is any law against a company revising its health insurance offering, especially for new employees in order to reduce the cost of health insurance. Toyota may consider whether it has sufficient ability to counter adverse changes by ramping up lobby efforts to encourage dialogue on potentially adverse proposals or decisions.

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Economic factors One of the indicators of growth in any economy is the rate of wage growth. This statistic has grown as shown by the results of the second quarter of 2018 (April to June) (Long). Toyota may interpret this statistic by considering its own internal performance. It may ask itself how it is contributing to the wage growth recorded by the US Government in that period. The Trump administration also introduced tax cuts (Gittleson) for both individuals and corporations in 2018. The corporation tax rate decreased from a maximum 35% to 21% which is a huge change (Gittleson). Toyota may be looking at increased tax savings after the changes in the corporation tax rates which means that the company will have more money to spend. The company may therefore need to consider what it will use the tax savings for.

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Should there be any investments which Toyota may have lined up for the future, then it may be able to make those investments sooner than anticipated. That way, coupled with information about population (where Toyota may be able to tell the population of each demographic group), Toyota would be able to better serve the market and even forecast sales for better planning. Beliefs about health is particularly important. Toyota needs to consider what consumers’ attitudes are prevailing with respect to environmental pollution. This would certainly have an impact on the design of Toyota’s models to reduce gas emissions. Another example of a social factor is accident rates. As such, Toyota should continue its efforts in trying to have several electric vehicle models available by the year 2020 ("Toyota To Make More Than 10 Battery EV Models In Early 2020S").

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That said, the company should be on the look-out for additional technological changes in a fast-paced automobile innovation environment. The company should ensure that its Research and Development team is vibrant, agile and keen on keeping up with technological changes. In line with this, Toyota is currently exploring the possibilities of releasing a vehicle model which can fly and it is working on this with an auto start-up in Japan (Burns). PEST analysis of Volkswagen 3. The uncertainties of doing business with and in America, as evidenced by the current trade reforms have also affected the value of Volkswagen’s stock (Palazzo, and Reiter). This kind of uncertainty leads to volatility in the markets and affects the company’s value as well as shareholder perception. This sort of thing may have the effect of causing any planned investments to stall as the company hesitates to see what will happen in future.

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Trump's administration's health care reforms will also affect Volkswagen, similarly to Toyota, as it will result in increased employment costs in the form of health insurance coverage (Kiley). Despite the withdrawal of the US from the Paris climate change agreement, Volkswagen may still need to consider its business in light of environmental requirements and keep up its efforts to reduce pollution (Mooney). American attitudes would certainly have an impact on how the market receives Volkswagen’s vehicle therefore the company should take this into account as well. One such example is the attitude of Americans towards Volkswagen in the wake of the 2015 scandal where the company was found to have fitted its cars with devices that would help circumvent the US’ stringent gas emission rules. Similarly, information about demographics including statistics on population growth is necessary for being able to forecast and plan how much of each model to manufacture and import as the case may be.

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Safety is essential and that is why Volkswagen would want to ensure that it is able to manufacture and sell the safest vehicles in line with the safety standards expected by Americans (Leggett). The effect of this scandal is that consumers may have lost faith in the manufacturer and this may need to be rebuilt over time in order to recover its market share in the US and perhaps surpass its current performance which is not bad in the least (Leggett). Palazzo, and Reiter). Reforms in health care may mean increased employment costs for Chevrolet as well. Without universal health care it will be difficult to make health insurance more affordable for employers like Chevrolet (Kiley). Further, the company must continue to focus on making its cars more environment-friendly amid calls for Governments to take more collective efforts towards protecting the climate (Mooney).

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The reentry of a Ford plant into the US also means additional competition from a fellow American automobile manufacturer. American attitudes towards the Chevrolet brand must be built upon to ensure that the company maintains its market share. Technological factors Technology is a huge disruptor; nothing pushes a company’s research and development efforts more than the thought that a competitor is making strides in a given direction. Chevrolet has to keep in mind the fact that its competitors are working on the car of the future. Certainly, the electric car which both Toyota and Volkswagen have an eye on is one of the cars of the future (Kehnscherper, and Reiter). However, there are always new technologies to consider in order to succeed in the not too distant future.  Chevrolet. Com, 2018, https://www.

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chevrolet. com/electric/bolt-ev-electric-car. Accessed 21 Oct 2018. Accessed 21 Oct 2018. Ell, Kellie. Tariffs Create Uncertainty In The Automotive Industry, Says Former Toyota Exec".  CNBC, 2018, https://www. cnbc. Environment & PEST Analysis: An Approach To External Business Environment". International Journal of Modern Social Sciences, vol 2, no. semanticscholar. org/d9d2/86c5a903a91d4e5e6cff565f186f91383a02. pdf. Please".  Forbes, 2018, https://www. forbes. com/sites/davidkiley5/2018/06/27/auto-industry-to-trump-keep-your-tariffs-please/#59972b8f75df. Accessed 21 Oct 2018. Accessed 21 Oct 2018. Long, Heather.  Washington Post, 2018, https://www. washingtonpost. com/business/2018/08/10/america-wage-growth-is-getting-wiped-out-entirely-by-inflation/?utm_term=.  Bloomberg. Com, 2018, https://www. bloomberg. com/news/articles/2018-06-22/trump-s-latest-tariff-threat-sends-daimler-bmw-stock-reeling. Accessed 21 Oct 2018. pp. Prins, Nomi. These 5 Trump Policies Are Leading Us Toward Economic Chaos".  The Nation, 2018, https://www. thenation. economist. com/leaders/2018/05/24/why-corporate-america-loves-donald-trump. Accessed 21 Oct 2018.

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