Toyota Motor Corporation is a Japan based multinational automotive company engaged in the manufacturing of motor cars and vehicles. It was incorporated on 27 August 1937 having its headquarters situated in Toyota, Aichi. Apart from automotive sector, the company also operates in finance and other industries. It segments include automotive, financial services and others. The company covers the market of North America, Japan, Asia and Europe in automobile sector.
It produces its automobile and other related parts through 50 overseas manufacturing companies and in over 30 countries apart from Japan. As of 2017, the company has 364,445 employees and was considered as the fifth largest company in terms of revenue. It has also been ranked second in the list of largest automotive manufacturer. It is the largest listed company in Japan as per its market capitalization and revenue. Toyota is also listed on London Stock Exchange and New York Stock Exchange (Reuters. 2018).
This report focuses on the overall evaluation of company’s activities from environmental and legal aspects. It covers the positive and negative impact of its operations along with the benefits of GRI disclosures. It also compares the quality and depth of the environmental performance of Toyota and BMW.
Environmental and social impacts of Toyota’s operations
Being the leading company in automotive sector, the company has a great responsibility towards the society and environment. The manufacturing of automobiles affects the environment and society to a great extent. The objective of Toyota is to carry out its activities by keeping two things in mind which are customers and concern for the environment. However, despite working with such objective, the manufacturing operations do left a positive and negative impact on the society and the surroundings. All such impacts are been disclosed in the sustainability report of the company and also the compliance with GRI disclosures act as the pioneers of environment and assist in having better understanding about the social and environmental impact of business activities.
Positive impacts
The following section explains in detail about the positive effects of Toyota’s manufacturing activities on both the society and the concerned environment. They are as follows:
Despite taking such positive measures, there are some operations also which have impacted the society and environment negatively. They are as follows:
So, above discussed are some positive and negative effects of the operations and business activities carried out by Toyota within its organizations.
Four key GRI disclosures
Global Reporting Initiative is an independent standards organization operating on international level. It helps the government, organizations and businesses to understand the impacts of their activities on climate change, human rights and corruption. GRI 102: General Disclosures deal with the reporting of information containing profile of the company, strategies, ethics and integrity, practises of stakeholder engagement and procedure of reporting.
The four key disclosures of GRI that are relevant to the shareholders or stakeholders of Toyota are as follows:
Introducing the energy efficient products in the market will help the customers to select their choice of cars and the one that best suits to their needs and preferences. Toyota uses fuels and automotive powertrain diversification processes that results in attracting a lot of shareholders and also enhance the economy of dominant market. Inclusion of products like hybrid vehicles and full cycle vehicles allow the stakeholders to cover a huge market share (Haider & Kokubu, 2015).
Toyota also discloses that their human support functions helps in understanding the objectives and promotes the safety of its customers and enhance their health management. Its products provide health support and in a way encourage the stakeholders to take the advantage of same.
Toyota is focused on commencing its business by keeping in mind the various environment-related polices. It clearly indicates that the company has properly followed all the GRI Disclosures and has aligned to its reporting standards. The Disclosure 102-16 provides the details about the standards, norms, principles and values. Toyota’s development of Zero emission vehicles and fast energy filling stations will eventually be more relevant to the shareholders (Isaksson & Mitra, 2018)
There is a wide range of products offered by Toyota including manufacturing of automotives, engines, electric and no-electric cars and others. Material handling equipments and textile machinery are also offered by the company. All the product related information is available on the website of Toyota which is very much useful for its shareholders in order to understand its business activities.
Comparison of quality and depth
The below table shows the environmental practices done by BMW and Toyota and compares the quality and depth of each.
|
Particulars |
Toyota Corporations |
BMW Group |
|
Carbon Disclosure Project |
A GRADE |
A GRADE |
|
Promote Sustainable Societies |
AA GRADE |
AA GRADE |
|
Sustainable Value Nature |
Positive |
Closet to Positive |
|
Best Environmental Car 2018 |
According to the reports of Automotive Science Group Toyota’s Prius Prime is the best car of 2018 in terms of environmental concerns. |
BMW stands art second position. |
|
CO2 Emissions |
The efficiency of Toyota Prius increased to 56 MPG and CO2-e emissions per mile raised to 226 grams. |
BMW reduces the CO2 emissions by 141 grams per kilometre with its new vehicle. Furthermore, the company is providing electricity free of CO2 (Globalreporting. 2016). |
|
Initiatives |
· Steps taken in respect of rainforest restoration. · Campaigning done for Toyota Traffic Safety. · Electronic Car · Cell Vehicles |
· Conducted programs related to HIV and aids at the workplace. · Created fast energy stations. · Inzell Initiative |
|
Strategy |
· Adopted KAIZEN costing system in its organization. · THUMS Model development. · Eco Electrification |
· Make use of renewable energy resources · Create a healthy working environment for the workers. · Increasing diversity. |
|
Achievements |
· Addition of Pollinator gardens. · Recycling of 92% of the waste generated. · Revealing Project Portal got installed. |
· Rewarded as the Fleet Manufacturer of the year · CO2 emission falls constantly. · Recycling the models in order to promote waste management. |
Benefits to the shareholders from the compliance of GRI Reporting standards
The GRI disclosures in a way provide full information about the company’s activities and operations. Therefore, the presentation of same will benefit the shareholders as they will be aware about all the relevant data and corporate practices of the company that have a significant impact on society and environment. The G4 standards lay more emphasis on information related to sustainability issues and the data important and relevant to the shareholders.
The widespread compliance with such standards by other motor corporations may create a sense of responsibility but it will not be beneficial for the shareholders and potential investors of Toyota. The disclosures provide a sort of assurance and the stakeholders such as customers, investors and other prefer those companies that have properly disclosed all the information (Toyota global, 2017).
If other companies like BMW, Mercedes are complying with the GRI standards, then the stakeholders of Toyota will be highly influenced. Moreover, reporting all the information will attract the customers and give a sense of surety to them. This will result in high competition between Toyota and other corporations and will affect its stakeholders to a great extent (Maginnis, Hapuwatte & Jawahir, 2017).
Conclusion
The above report concludes that the performance of Toyota was quite impressive from the perspective of environment and society. The company is focused on creating positive impacts on the surrounding s by adopting various initiatives. Moreover, it has made several achievements as compare to BMW and has properly aligned with the GRI Standards.
Part B
The new production line ‘Smart’ vehicle of Toyota involved the manufacturing of automated products or cars which involve some fixed and variable cost that are associated with its production. The major cost incurred in the production process involves the following:
The cost incurred in the production and shown in the above table can be easily classified on the basis of their cost behaviour. Fixed costs are generally the ones which do not change or fluctuate according to the changes in company’s level of production. They remain same at all the levels and in the production of automated smart vehicle; Toyota has incurred the cost of $300,000 as its fixed cost.Variable costs are the ones which change according to the level of production. In the above table the cost which can be identified as variable are the raw materials such as aluminium, steel products, labour required and the spare parts and other accessories needed for the production. Products like Engine and Gasoline are treated as fixed cost (Lucey & Lucey, 2004). Break even analysis is the concept which is very important for the companies to apply in their business as it determines the targeted units required to be manufactured where the company earn not profit and no loss.
The manufacturing of the new product require some sort of fixed and variable costs that are huge in amount. Therefore, it is very much necessary for the companies to conduct a break even analysis in order to set their selling price and cater to the needs of customers. BEP will let Toyota know about the targeted units of production and the company can figure out how much cost is to be incurred on what number of units. It can easily set its revenue targets in order to book high profits (Ahmed, 2015).The balanced scorecard attached below explains lead and lag measures along with an objective for the each perspective in relation to the new production line.
The features of above scorecard are as follows:
The reason for choosing such measures is to meet the objective of each perspective and increase the productivity of the new ‘smart’ vehicle by considering all the factors such as internal process performance and growth and learning perspective of employees and managers.
Part CThe three hypothetical products chosen by Toyota are Blue Tooth Head Set, Demisting mirrors and Self Cleaning Mats. However according to the given scenario all the products resulted in an after tax loss due to high fixed cost and expenses. The BEP units and after tax profit figure calculated for all the three products are as follows:
The above tables shows that as per the given information the BEP units required for each product are 5377 units, 3734 units and 4182 units respectively. According to the expected units all the products have reported a loss after considering the fixed and variable costs. However, in order to improve the same some initiatives can be taken which are explained below.MemorandumTo: Sales TeamFrom: Financial Analyst Date: 12 September 2018Subject: Enhancing annual profits and production unitsAccording to the calculation done, it has been observed that the number of units produced for each product is less than its BEP units which ultimately resulted in loss figures for all of them.
The first initiative which can be taken by the company is to increase its production units and manufacture above the break-even point. This will ultimately enhance the sales of each product which can be used to cover high fixed costs and variable overheads. Furthermore, the company can raise the prices which will impact its BEP units and contribution margin. If the selling price increases the contribution will rise and it will automatically reduce the break even units. Once the targeted units reduced the company can produce less and sell the same at higher prices in order to book profits.
Along with the low production, the variable cost associated with it will also decline, creating on a whole a profit making situation (Otley, 2016).Another initiative which can be taken is to reduce the fixed cost of the organization. As per the current scenario, most of it comprises of marketing cost and depreciation on equipment. Toyota should spend less on the marketing of its products for the purpose of reporting profits on the same. Following are the results of initiatives discussed above:
If the company follows above initiatives it can earn after tax profit for its products. However, such measures impact the selling price, sales mix and production units of the products decided. The proposed initiatives will also affect the break-even point of the company as follows:
It can be seen that as the selling price increases the BEP units for each product reduced to a great extent which will ultimately enhance the profitability position of the company. So, Toyota sales team can take such initiatives.
References
Ahmed, M. N. (2015). UTILITY OF MANAGEMENT ACCOUNTING TOOLS & TECHNIQUES FOR THE SUCCESSFUL RETAIL OPERATIONS-A THEORETICAL FRAMEWORK. Journal of Management Value & Ethics, 15(2, 22-107.Crane, A., & Matten,
D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts.
California: Routledge.Globalreporting. (2016). Global marketing strategy of BMW.
Globalreporting. (2016). GRI AND SUSTAINABILITY REPORTING.
Greenbiz. (2016). BMW and Toyota Create Most ‘Sustainable Value,’ Report Finds; GM, Fiat AmongLaggers.
Haider, M. B., & Kokubu, K. (2015). Assurance and third-party comment in sustainability reporting in Japan: a descriptive study. International Journal of Environment and Sustainable Development, 14(3), 207-230. Isaksson, L. E.,
&Mitra, N. (2018). ISO 26000: The Toyota Motor Corporation’s CSR Approaches in India. In ISO 26000-A Standardized View on Corporate Social Responsibility (pp. 137-157).Springer, Cham.Lucey, T., & Lucey, T. (2004).
Management information systems. Cengage Learning EMEA.Maginnis, M. A., Hapuwatte, B. M., &Jawahir, I. S. (2017, July). Implementing Total Lifecycle Product Sustainability Through True Lean Thinking. In IFIP International Conference on Product Lifecycle Management (pp. 544-553).Springer, Cham.Otley, D. (2016).
The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.Reuters. (2018). Toyota Motor Corp (TM).
Making Ever-better Cars and Human Resource Development: The Forces That Power Sustainable Growth.
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