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Positive and Negative Impact of Toyota Motor Corporation

Part A
In recent years, directors and CEOs of companies have been placing more importance on holistic reporting of company activities rather than simply reporting what is required by the Accounting Standards, the Corporations Act and other legislation. The Global Reporting Initiative (GRI) is an international not-for-profit organisation that has pioneered and developed the world’s most widely used voluntary Sustainability Reporting Framework.

In 2016, the Sustainability Reporting Standards were released, which apply from 1 July 2018. These can be accessed via this link: https://www.globalreporting.org/standards

Toyota Motor Corporation's website includes statements and other general information concerning Business Sustainability.

Required:

With specific reference to 'GRI 102: General Disclosures' of the Sustainability Reporting Standards, your task is to write a report that:

Provides an overview of the environmental and social impacts (positive and negative) of Toyota Motor Corporation's operations .
Identifies and discusses four key GRI disclosures that are likely to be of most relevance to the stakeholders of Toyota Motor Corporation and reviews whether this information is provided by the organisation.
Compares the quality and depth of environmental performance information provided by Toyota Motor Corporation with the practices of BMW Group.
Evaluates whether widespread compliance with the GRI Reporting Standards by other Motor Vehicle Corporations would benefit potential investors, current shareholders and other stakeholders of Toyota Motor Corporation.
The assignment needs to be thoroughly researched and presented in a business report format including:
Penalties will apply where the word limit is exceeded by more than 10%. References must be clearly acknowledged in-text and in the reference list and in accordance


Part B
A key part of Toyota Motor Corporation's growth strategy has been to look at opportunities with new technologies available to the market. New areas, such as Artificial Intelligence, automated driving, robotics, and connected cars, are becoming especially important, and it is no longer enough to focus just on developing excellent cars and technologies or to carry on sales and service in the same old ways. (http://www.toyota-global.com/company/message_from_president/). Leveraging this idea, they could develop a new 'smart' vehicle incorporating a number of these technologies.

Required:

Identify the likely major costs associated with the ongoing operations of the production line for the new 'Smart' vehicle (2 Marks).
Estimate the cost behaviour (fixed, variable or otherwise) of each of the major costs identified above in requirement 1 (2 Marks).
Given your understanding of the cost behaviour of the major costs associated with the ongoing production of the Smart car, critically evaluate whether the use of break-even analysis would be a useful and reliable screening tool for Toyota Motor Corporation as they assess the desirability of producing this new product.
Develop a balanced scorecard that could be used to evaluate the success of Toyota Motor Corporation’s strategy to sell this product internationally. For each perspective, identify one objective and include a lead and lag measure for each objective. You should make use of both financial and non-financial measures (the table below can be used to summarise your findings).

Positive and Negative Impact of Toyota Motor Corporation

Introduction:

Toyota Motor Corporation is a Japanese company which operates its services and hold its production houses at various countries. The main operations of the business are to manufacture and retail the motor vehicles and the commercial vehicles. Company has come into the market in the year of 1937. Headquarter of the company is in Japan. Toyota motors have also started operating in the financial industry. Mainly, the area of operations of the company is Asia, Europe, Japan and American market (Reuters, 2018). Mainly 50 production houses are held by the company and the customers of the company are in 170 countries.

Toyota motors have been in the second rank in context to produce the highest number of cars. In the market of Japan, it is the largest company in context with the revenue and market capitalization. Around 3,64,445 employees are working with the company.

Each of the company is part of the society and thus it becomes important for them to identify and evaluate all the related factors of the society and must launch new events and programs on regular basis to improve the society level and does not harm the environment at huge level. The production houses and especially the manufacturing of the electric products, automobiles etc affect the environment at huge level. The main motto of Toyota is to carry out the activities and operations in such a way that the environment could be affected at lower level or not affect at all. The company keeps two factors always in mind. One is to take care about the environment and other is to improve the society level. The company has disclosed about the environment and the social events in the sustainability report and has disclosed all the compliance of GRI disclosure in order to improve the environment level in the society.

 Because of the events and the activities of the Toyota motors corporations, following positive changes have taken place in the environment performance and the society welfare:

  • Company has launched various events as well as suitable initiatives have been taken by the company in order to protect the environment and the forest. The ToyotoShirakawa-Go-Eco-Institute of the company focuses on the forest and plant while various other programs have also bee launched by the company in various countries to improve the society and environment performance.
  • Toyota Motor Corporation has launched various events and programmes for the human resources management and the welfare of the society in order to improve the overall performance and living standards of the society (Toyota global, 2017).
  • The cleaning program has been focused mainly be the company to resolve the health issues and reduce the pollution from the environment.
  • The company has also promoted the local music, dance and food to attract the society and develop the social welfare programs.

Along with the positive impact on the society and environment, few negative impacts have also been seen. Few of them are as follows:

  • The company has produced huge number of vehicles. Due to which the natural resources of the society have been lowered a well as the production process has affected the environment at great level.
  • The cars and other vehicles required fuel to run. The huge number of cars on the road is improving the prices of fuel and the lack of fuel is also taking place.
  • Breathing issues, global warming, increased level of pollution, lack of diesel and petrol etc are the some of the issues which has taken place in the society because of the production process and huge number of cars on the road.

The positive and negative impact of Toyota Motor Corporation explains that the production process and huge number of cars on the road has affected the society and environment at great level but the company has lunched various events and programs to reduce the level of negative impact.

GRI Disclosures

GRI is an independent organization which helps the government and the companies to understand the impacts and issues of the human right, climates changes, pollution etc. It has launched a framework which is required to be followed by the company. It evaluates that how the companies are managing the society welfare and the environment place. It deals with the companies to disclose their strategies, activities, stakeholder practices, reporting process, events and programs etc in the annual report or the sustainability report. The main key GRI disclosure which has been followed by Toyota Motors is as follows:

Products and services:

Products and services of an organization must be disclosed along with their brief in the annual report of the business. In case of Toyota Motor Corporation, it has been found that the company has disclosed about all of the products along with their brief description for the stakeholders of the business to develop their understanding and interest in the business (Wagner, 2011).

Energy:

Energy is one of the natural resources which must be used by the business in an efficient way. To reduce the uses of energy and enhance the environment level in the society, Toyota Motor Corporation has launched new energy efficient cars. The company has offered different segment in the energy efficiency cars so that the customers could chose it according to their wish. The company has disclosed the brief about the product and their efficiency level in the annual report for the stakeholders of the business to develop their understanding and interest in the business.

Emission, Effluents and waste:

Wastage and emission of an organization must be treated and reuse it properly in order to not to affect the environment. In case of Toyota Motor Corporation, it has been found that the company is using the waste again to reduce the impact on the environment and all the details have been disclosed by the company in the annual report of the company (Jose  & Lee, 2007).

Customer health and safety:

Health and safety of the customers is one of the crucial element and the factor which must be evaluated and focused by the business in an effective way. In case of Toyota Motor Corporation, it has been found that the company has launched various programs and offering the special services to the customers to reduce the level of any hazards. The company is offering the quality products along with the various safety products such as air bags etc. The company has disclosed the brief about the services in the annual report for the stakeholders of the business to develop their understanding and interest in the business.

Comparison with BMW

The report of the company explains that the GRI disclosures have been done by the company in an efficient way in order to develop the understanding attractiveness among the shareholders of the business.

The main competitors company of Toyota is BMW. The comparison has been done among both the companies to identify the depth and quality of environment performance. The comparison is as follows:

Carbon disclosure project:

Both of the companies have been awarded as a grade in order to their carbon disclosure project.

Promote sustainable societies:

Both of the companies have been awarded as AA grade in order to promote the sustainable societies.

Best environment car:

The car “prime plus” of Toyota has been awarded as the best environment car. However, the car of BMW got the second position.

Initiatives:

Toyota motors have taken various initiatives such as electric cars, campaign for the traffic safety, rainforest restoration etc. On the other hand, the BMW has taken the initiate for fast energy station, various disease etc (Global reporting, 2016).

Co2 emission:

The Co2 emission process of Toyota is better as the new cars are concentrating on the less Co2. The BMW is following the similar strategies to manage the environment performance (Global reporting, 2016).

It expresses that the environmental performance of Toyota motors is enough competitive in the market.

The GRI is an independent organization which mainly works in the market to offer a framework to the companies and the government which must be followed by the business and disclose all the relate information about the business to the shareholders and other stakeholders of the business (Sherman, 2011). The GRI compliances make it easy for the stakeholders to identify and evaluate the performance of the business in context with the society and the environment.

It creates a sense of responsibility among the companies which leads them towards better management of the society and the environment position. The disclosure of the GRI compliances assures the stakeholders of the business that all the related information has been disclosed by the business (Greenbiz, 2016). In case of Toyota motors, the framework has been followed by the company which has helped the company in better goodwill and attractiveness among the shareholders of the business.  

Conclusion:

To conclude, Toyota has managed and planned better place for the society and the environment. The initiates of the company are for the welfare of the society and the GRI disclosure has lead to the business towards better goodwill and attractiveness among the shareholders of the business.

  1. The ongoing cost for the “Smart car” of the company is as follows:

Cost

Amount (in $ '000)

Raw Materials for car

$1,500

Labour Cost

$1,000

Spare parts

$750

Gasoline

$750

Engine material

$1,000

Other variable cost

$900

Fixed cost

$4,000

  1. From the above table of the cost, it has been estimated that the $ 5900 is the variable cost of the business and rest $ 4000 is the fixed cost of the business. The raw material, labour, spare parts, gasoline, engine and other variable cost are directly related to the production process of the business while $ 4000 is the fixed cost which would definitely occurred in the business even in case of 0 production units.
  2. Break even analysis is a production tool which is used by the businesses to identify the minimum production unit where the business would be able to cover all the associated cost (Dingwerth & Eichinger, 2010). It is necessarily recognized by the companies in order to make better strategies for the margin of safety of the business.
  3. Balance scorecard:

Balanced Score Card: Smart Car Production

Financial

Objectives

Measures

Initiatives

the sales and profit growth

Lead: % change the sales

Identify the changes in the sales in %.

Lag: % growth

Customer

Objective

Measures

Initiatives

Improve the loyalty and demand of the customers

Lead: evaluate demand and offer products accordingly

company must launch new products on regular basis

Lag: the substitute products

Internal Business Process  

Objective

Measures

Initiatives

human resources management and improvement in internal process

Lead: identify the demotivated factors

the company should launch new training programs for the employees (Toyota global, 2017)

Lag: effect of changes in the operations

Learning and Growth

Objective

Measures

Initiatives

Advanced technology

Lead: identify the better technology

Company is required to adopt the technology after comforting the employees.

Lag: Identify the right people

(Greenbiz, 2016)

The above measurement for smart car in the balanced scorecard has been chosen because of their relevancy and the competitive level of the business in the market.

  1. Breakeven point:

Sales mix

Cost

40%

 $                           17.31

28%

 $                             5.31

31%

 $                           10.85

 

 

Weighted Average CM per Unit

33.48

 

Composite BEP

 

Fixed cost

445,000.00

Weighted Average CM per Unit

33.48

BEP units

13,293

Sales mix

40%

28%

31%

Break even units

13,293

13,293

13,293

Product units at BEP

                              5,377

                  3,734

                       4,182

  1. After tax profit:

Calculation of after tax profit

 

 

 

 

Blue Tooth Head Set

Demisting mirrors

Self Cleaning Mats

Expected units

2057

2660

2414

 

Sales

 $                  180,000.00

 $      125,000.00

 $           140,000.00

Less:

Labour cost

 $                    32,914.29

 $        31,914.89

 $             24,137.93

Material cost

 $                    57,600.00

 $        41,223.40

 $             31,379.31

Variable overhead

 $                      1,440.00

 $          1,595.74

 $               1,206.90

Fixed cost

 $                  128,381.91

 $      165,978.39

 $           150,639.70

Total cost

 $                  220,336.20

 $      240,712.43

 $           207,363.84

Net profit/Loss

-$                   40,336.20

-$      115,712.43

-$            67,363.84

Tax rate

30%

30%

30%

NPAT

-$                    28,235.34

-$        80,998.70

-$             47,154.68


Memorandum:

The calculations have been done on the company’s daily production and it has been found that the company is required to improve the production units. Because the current units of the company are lower than the breakeven units which means the company is not even able to make the enough revenue to cover the associated cost of the production. If the production units can’t be increased by the company than company is required to take other initiates such as company could make the changes into the sales mix or the fixed cost to reduce the number of break even units. At that level, the cost of the business would be overcome.

References:

Dingwerth, K., & Eichinger, M. (2010). Tamed transparency: How information disclosure under the global reporting initiative fails to empower. Global Environmental Politics, 10(3), 74-96.

Globalreporting. (2016). Global marketing strategy of BMW. Retrieved from: https://globalmarketingprofessor.com/global-marketing-strategy-of-bmw/

Globalreporting. (2016). GRI AND SUSTAINABILITY REPORTING. Retrieved from: https://www.globalreporting.org/information/sustainability-reporting/Pages/gri-standards.aspx.

Greenbiz. (2016). BMW and Toyota Create Most 'Sustainable Value,' Report Finds; GM, Fiat AmongLaggers. Retrieved from: https://www.greenbiz.com/news/2009/11/02/bmw-and-toyota-create-most-sustainable-value-gm-fiat-lag

Jose, A., & Lee, S. M. (2007). Environmental reporting of global corporations: A content analysis based on website disclosures. Journal of Business Ethics, 72(4), 307-321.

Reuters. (2018). Toyota Motor Corp (TM). Retrieved from: https://www.reuters.com/finance/stocks/companyProfile/TM 

Sherman, W. R. (2011). Sustainable mobility: a look at the automotive industry. Journal of Business and Economics Research, 9(10), 47-64.

Toyota global, (2017).Making Ever-better Cars and Human Resource Development: The Forces That Power Sustainable Growth. Retrieved from: https://www.toyota.com/usa/environment/

Wagner, W. E. (2011). Imagining corporate sustainability as a public good rather than a corporate bad. Wake Forest L. Rev., 46, 561.

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