Toyota: Analyzing the Non Controllable Economic Environment of an International Operating Company

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International Economic Environment

Toyota Motor Corporation

Group paper

Analysing the non-controllable economic environment of an international operating company

Date of publication: 16-02-2012

Group 16
Lennart Bayer

Rick Cobussen

Yixing Gai

Marieke Martens

Table of Contents

Business cycle sensitivity4
Figures from Toyota4
Quotations from the annual reports (2005-2011)5
Actual figures of aggregated demand5
Gross Domestic Product6
Consumption7
Consumer confidence9
Overall Market Demand10

Exchange rate sensitivity11

Cost of production sensitivity16
Wage development compared to turnover growth16
Wage development compared to price increase.16
Wage development and wage per unit17
How important are commodity prices?17

Monetary Policy20
Investments20

Fiscal policy22
Governmental expenses22

International Trade23
Export-Import23

Conclusion26

References27

Update: Bank of Japan stimulus to boost growth

The Bank of Japan (BOJ) has made a surprise move to boost growth as the country's economy continues to struggle. The central bank has announced it is to expand its asset purchase program by 10tn yen ($130bn; £83bn). The move comes just a day after data showed that Japan's economy shrank by more-than-expected 2.3% in the last three months of 2011. The BOJ also left rates unchanged at between zero and 0.1%. The central bank said it will use the extra funds to purchase Japanese government bonds. "The Bank will pursue powerful monetary easing by conducting its virtually zero interest rate policy and by implementing the Asset Purchase Program mainly through the purchase of financial assets," the bank said. 'Risky assets'

The announcement was greeted positively by the markets with the Japanese currency falling by as much as 0.4% to 77.96 yen against the US Dollar. The yen has been near record highs recently which has severely hindered Japan's export-led economy. 'High uncertainty'

The Japanese economy has been hurt by various factors over the past few months. At the same time, demand for Japanese goods has fallen in some of its biggest markets such as the eurozone, not least due to the economic issues in the region. The country's businesses have also been hurt by a strong yen, which makes Japanese goods less competitive.[1]

Business cycle sensitivity

In this chapter we are going to analyze the external economic factors that are directly related to the business cycle. We focus on to specific time frames; economic boom period (20004-2008) and the economic crisis (2009-2011).

Figures from Toyota

From 2004 onwards to 2008 was a booming period for Toyota, an increase of net revenue of 65,8%, to ¥26,289.2 billion in 5 years. Fiscal 2009, ended March 31, 2009, was an extremely difficult period for Toyota. On a consolidated basis, vehicles sales were down 1,346,000 units, to 7,567,000 units, and net revenues declined 21.9%, to ¥20,529.5 billion. On top of that, the Net Income resulted in a loss of ¥-436.9 billion.

In 2010 there was still a decline in net revenue of ¥1,578.6 billion, to ¥18,951 billion. The net income however increased to a positive ¥209.5 billion. In 2011 the revenue started to increase again, to ¥18,993.7 billion and the net income almost doubled to ¥408.2 billion.

Below, in the graph 'Toyota Consolidated Vehicle Sales' is the units’ sales per region visible.[i]

[pic]

Below, in the graph 'Consolidated Performance (U.S. GAAP)' is the revenue, operating income and net income visible.[ii]

[pic]

Quotations from the annual reports (2005-2011)

From 2005 until 2008 there are less economic environmental factors mentioned in the annual reports. The only aspect that is mentioned is that the demand in Japan, North America and Europe is very important. Furthermore, Toyota states...
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