Organisational Audit And Environmental Audit Marketing Essay

Basically, organizational and environmental auditing techniques are divided into two parts, which are the internal factor evaluation and external factor evaluation. Organisational audit is commonly referred to as internal factors evaluation while environmental audit is referred to as the external factor evaluation. Referring to the case study, Toyota USA can enhance the financial performance and effectiveness of the company through the implementation of organisational audit and environmental audit. Besides that, organisational audit and environmental audit is an important element in the strategic planning process in order for Toyota USA to react better to the changes in the external environment and apply changes to response to the changes.

3.1 ORGANISATIONAL AUDIT

According to audit.gov.my, organisational audit is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approached to evaluate and improve the effectiveness of risk management, control, and governance processes. In other words, organisational audit is referred to as an activity which is created to assist an organisation in improving its operations by identifying the strengths and weaknesses of the organisation to achieve its objectives.

3.1.1 CUSTOMERS

In another term, customers of Toyota can be described as the buyers or consumers who purchased nearly all of the organisation’s output. Toyota seeks to create loyal customers relationship through understanding who are their buyers and also the buyers’ needs and demand. They listen to their customers and their product development is driven by customers feedback. Toyota stresses on improving quality, enhancing its efficiency, minimising cost, and increasing its productivity in order to fulfill their customers’ requirements and be the market leader in the automobile industry as they are today. In addition to that, Toyota implemented quality control in its manufacturing process to produce quality cars. Toyota also produces different lines of cars for the different customers. For example, cars, truck, SUV’s, and sports cars. The bargaining power of buyers nowadays is moderately high. This is because the buyers nowadays are more educated and they have access to informations. Toyota USA depends on its customers to survive in the business as these customers represent a large portion of the organisation’s revenue. Toyota will face the risk of losing its customers to competitors if they are unable to satisfy the customers’ demands. If the customers are unhappy, they can easily purchase a new car by selling the car that they own. Therefore, the customers have low switching cost. This is due to the reason that the number of buyers is few and not large. Besides that, Toyota also has no complete control over external factors like the prices of oil, steel, rubber, plastic and glass production, etc in which the company is highly dependent on in its manufacturing process.

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3.1.2 COMPETITORS

Toyota is in a strong position compared to other car manufacturers. It has one of the largest market share in the automobile industry in the US market. Toyota’s close competitors include General Motors and Ford. Toyota’s strongest competitor, General Motors has a high percentage of sales growth. According to media.gm.com, the General Motors February 2010 reported sales are 32% sales growth if compared to February 2009. Toyota’s sales dropped 9% in February 2010 as it was forced to recall its cars from the US market due to faulty brakes. In the automotive industry, the rivalry among competitors is very strong. The rivalry increases as the competitors are very closely balanced. Toyota has to gain market share in the industry by taking it from its competitors. The high rivalry exists between these companies as these companies produce cars, trucks or SUV’s. Therefore, the differentiation opportunities are low. Most often, these competitors are compared with one another. The price and quality are among the aspects which are taken into account by buyers when they are making decision in what type of car thay want to purchase. The manufacturers even compare their products with their competitors when they advertise their products. Therefore, to be more advanced, Toyota has to come out with new technologies and differentiation such as an environmentally cars which is the Hybrid cars in order to compete with its competitors.

3.2 ENVIRONMENTAL AUDIT

According to David, 2007, environmental audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided. The environmental audit is not aimed at developing an exhaustive list of every possible factor that could influence a business; rather, it is aimed at identifying key variables that offer actionable responses. In other words, it means that environmental audit is the process of identifying the key opportunities and threats faced by an organisation to develop strategies which could benefit from the opportunities and avoid the impact of threats.

3.2.1 ECONOMICS FORCES

In developing countries, the automotive industry is one of the main industry that contributes to the economic progress. Automotive industry helps to develop an efficient steel business, plastic industry, rubber industry, glass sector, and many more which is a vital base of economic progress. The automotive industry used to be an important industry in the twentieth century, however it has deteriorated due to the economic downturn that results in decline in sales and profits. Yet, there is a future for the automobile industry as it provides job opportunities to the residents in US. This is due to the fact that automotive industry is the main user computer chips, aluminium, steel, plastics, rubber, glass, etc. Therefore, there is a need for workers in these industries. This situation creates job opportunities for the US citizens in the various industries mentioned above which would then lead to the growth in US economic.

3.2.2 TECHNOLOGICAL FORCES

Nowadays, information technology has a huge impact on businesses all around the world. Many major industries have been affected by the usage of internet, including the automobile industry. Most of the buyers will refer or browse through the internet first before making a purchase. Similarly, before purchasing a car, the buyers will go to the auto websites before going for a test drive. Therefore, the use of internet is efficient and lower in cost that offer more market opportunities to Toyota. Besides that, due to the concern for environmental and global warming issues, Toyota has conducted research to invent alternate fuel vehicles. The company decided to come up with the technology to produce electric cars to fulfil the legislation demand from the government. The production of electric car is becoming more practical these days. To compete in the market, Toyota has invented the Toyota Prius, a hybrid car that functions with an internal combustion engine.

3.3 INDUSTRY ANALYSIS

3.3.1 IFE MATRIX ANALYSIS FOR TOYOTA

TOYOTA-KEY INTERNAL FACTORS

WEIGHT

RATING

WEIGHTED SCORE

STRENGTHS

Financial stability

0.25

4

1.00

Strong brand name

0.25

4

1.00

Environmental friendly cars

0.20

4

0.80

WEAKNESSES

Economic downturns

0.15

2

0.30

Seen as foreign importers

0.15

3

0.45

TOTAL

1.00

3.55

According to the IFE matrix analysis which I have constructed above, the strengths for Toyota which I have identified are financial stability, strong brand name, and also environmental friendly cars. Toyota has a high financial advantage, where in the year 1997, the sales turnover was £131,511 million whereas the sales growth recorded was 29.3%. Therefore, I have given financial stability a weight of 0.25, a rating of 4, which result in the weighted score of 1.00 as financial stability is one of the important component for the success of a business organisation and Toyota has managed to maintain its financial stability. Next, I have given strong brand name a weight of 0.25, a rating of 4, that lead to a weighted score of 1.00. This is because a strong brand name will be able to gain customers’ trust of a product thus creating loyal customers relationship. Toyota is well known for producing cars that are of high quality as the company implemented total quality management (TQM) and just in time (JIT) quality measurements in the its production process. The organisation stresses on delivering quality products and value to its customers. Besides that, Toyota also manufactures environmentally friendly cars to meet the current legislation demand. Due to the concern for environmental issues such as the green house effect and global warming, Toyota has produced hybrid gas electric vehicles as an alternate fuel vehicle. For instance, the Prius model. The hybrid cars are more practical and fuel efficient. Therefore, I have given environmental friendly cars a weight of 0.20, a rating of 4, and a weighted score of 0.80 as the company responds well to the demand for more environmental friendly cars.

Meanwhile, the weaknesses which I have identified for Toyota include economic downturn and where Toyota is seen as foreign importers. I have given economic downturn a weight of 0.15, a rating of 2, and a weighted score of 0.30. Toyota is a large organisation. Sometimes, being big has its own problems. The world market for cars is in a condition of oversupply. As most of Toyota’s products are marketed in US, it is exposed to the fluctuating economic condition in the market. As the exchange rate for US is high, there are chances and risks for the company to experience losses during the economic recession. Next, I have given Toyota a weight of 0.15, a rating of 3, and a weighted score of 0.45 where it is seen as foreign importers. As Toyota is a Japanese car manufacturer, it is seen as foreign importers when it operates in the US market. More benefits will be given to a US car manufacturers, for instance in the aspect of incentives and benefits of tax. The US government will also prioritise its local car manufacturers first compared to foreign companies. Besides that, the consumers in the US market will prefer to purchase cars from a US based manufacturer, for instance General Motor. Toyota would be the alternative choice for buyers in this market.

3.3.2 EFE MATRIX ANALYSIS FOR TOYOTA

TOYOTA-KEY EXTERNAL FACTORS

WEIGHT

RATING

WEIGHTED SCORE

OPPORTUNITIES

Global market untapped

0.25

4

1.00

Increased demand in Hybrid cars

0.25

4

1.00

THREATS

Product recalls

0.25

4

1.00

Increased price of raw materials

0.25

2

0.50

TOTAL

1.00

3.50

Based on the EFE matrix analysis which I have constructed above, the opportunities for Toyota include global market untapped and increased demand in hybrid cars. I have given Toyota a weight of 0.25, a rating of 4, and a weighted score of 1.00 for the opportunity on global market untapped. Toyota has explored and expand more aggressively into new segments of the market. For example, The launch of Aygo model by Toyota is aimed to gain a market share in the youth market. Next, I have given Toyota a weight of 0.25, a rating of 4, and a weighted score of 1.00 for the increased of demand in hybrid cars. Toyota is innovative as it has conducted research and development activity, and with the assistance of advancement in technology, it is the first company that invented the commercial mass-produced hybrid gas-electric vehicles that uses gas and electric, for instance the Prius model. With the hike in oil price, the production of hybrid cars by Toyota fits the needs of consumers who are looking for fuel saving vehicles.

On the other hand, the threats which I have identified for Toyota are product recalls and increase price of raw materials. I have given Toyota a weight of 0.25, a rating of 4, and a weighted score of 1.00 for product recalls. In year 2010, Toyota was forced to recall its cars from the US market due to faulty brakes. The recall of cars has affected Toyota’s image in the consumers’ minds where its brand name has dropped. This would then result in the decline in Toyota’s sales which will lead to the company’s loss. Besides that, I have also given Toyota a weight of 0.25, a rating of 2, and a weighted score of 0.50 for the increase price of raw materials. The price of raw materials cannot be controlled by Toyota and it fluctuates from time to time. During economic downturn or recession, the price of raw materials usually increase tremendously. The hike in price would then increase the cost of production for Toyota. However, Toyota has no choice but to contemplate with the price as it need the raw materials to manufacture its cars. Toyota would have to save on its manufacturing and production costs while maintaining the quality of its products. This may result in the loss of profits for Toyota.

3.4 WHY TOYOTA NEED TO AUDIT ORGANISATIONAL FACTORS AND

ENVIRONMENTAL FACTORS

Toyota need to audit its organisational and environmental factors as it gives various benefits to the organisation. The communication between the line and staff personnel of the organisation can be increased. There is also greater employee involvement in the decision making process which would improve organisational synergy. In addition to that, Toyota will be able to come up with a few strategic options that is useful to cope and react to changes in the external environment. New opportunities and the forecast of demand can be detected through the audit of organisational and environmental factors. Through the audit of organisational and environmental factors, the information obtained will assist Toyota in the strategic planning process of the organisation. Environmental scanning has a positive impact on Toyota in terms of communication, shared vision, strategic planning and management, and future direction. It improves communication on future plans by key people in the organisation. Environmental scanning is also used to monitor the market trends and fashions. The success of an organisation depends on its ability to react to the market trends. Environmental scanning assist Toyota in detecting the changing needs to its customers so that the company can be practical in monitoring, predicting, and responding to market trends. This helps Toyota in planning ahead of its competitors by building competitive strategies.

3.5 CONCLUSION

As conclusion, the organizational and environmental auditing techniques serve as tools to review and evaluate the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas and provides an understanding of the environment affecting the business operations. In order to understand and manage business risk well, business organisations have to monitor its business environment from time to time to track for changes and adapt to the changes in the environment. Therefore, Toyota USA should conduct the organizational and environmental auditing techniques to develop strategic formula in order to improve its business performance and also react to the changes in its business environment.