Background
Toyota’s core business was the manufacture and sale of automobiles. A successful company they have a presence in more than 170 countries.
However the vehicle industry as a whole faced with a huge threat to its survival. Oil accounted for 95% of global energy used for transportation (Energy Bulletin, 2007), also other factors including energy security, concerns over carbon emissions from burning fossil fuels and increasing demands for fossil fuels (and cars) in emerging economies is pushing, and will continue to push, up the price of oil.
As a result of these factors, the cost of petrol, used to power Toyota’s cars, was predicted to rise significantly, making Toyota’s products less attractive to customers.
This prediction was correct, with the monthly cost of filling up an average car in 2008 now exceeding £100 for the first time in history (The Telegraph, February, 2008).
In addition, Toyota knew that automotives were a significant source of carbon dioxide emissions and energy use. At the time consensus was growing amongst key stakeholder groups that CO2 emissions were causing global warming, a process where these gases form a blanket around the Earth, trapping energy from the sun causing the climate to change unnaturally, which would eventually demand global countermeasures which were likely to include measures governing emissions from automotives. Both of these issues posed a severe threat to Toyota’s core business as a car manufacturer. The company could predict that increased costs and changes in customer attitudes could damage their sales internationally, while governments were likely to penalize heavy emitters through taxes and legislation.
The Challenge
The challenge for Toyota was to acknowledge the potential threat of depleting oil reserves and climate change and change their strategy or products to meet the needs of future customers.
The Response
Toyota set up a group tasked with meeting the challenge of creating a vehicle for the
21st century, which would work within the parameters of natural resource constraints and environmental issues (World Business Council for Sustainable Development,
2005).
Toyota pioneered the concept of Hybrid (petrol/electric) technology to mass produce the world’s first eco-efficient vehicle, the Toyota Prius.
The vehicle featured the Hybrid Synergy Drive which integrated aspects such as an optimum mix of electric motor and petrol engine and electricity regeneration through the braking system. This allows the vehicle to run at an optimum level in terms of emissions efficiency, generating up to 89% fewer tailpipe pollutants than a conventional combustion engine.