Table 2014)……………………………….7 ii 1.0 Introduction Contemporary businesses have

Table of Contents

List of
List of
1.0

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1.1

1.2
2.0

tables ……………………………………………………………………………………………………. ii
figures …………………………………………………………………………………………………… ii
Introduction ……………………………………………………………………………………………. 1

Triple bottom line -287 …………………………………………………………… 2

Triple bottom line in Toyota…………………………………………………….. 2
Corporate Governance ……………………………………………………………………………. 4
Corporate social responsibility ………………………………………………………………….. 6
Financial analysis of Toyota …………………………………………………………………….. 9
Conclusion …………………………………………………………………………………………… 10

3.0
4.0
5.0
References …………………………………………………………… Error! Bookmark not defined.

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List of tables

Table 1.1 Triple bottom line, Source: (Wilson, 2015) …………………………………………….. 2

List of figures

Figure 2.1 Corporate governance structure of Toyota, Source: (Toyota, 2014) …………4
Figure 3.1 CSR stances, Source: (Johnson et al, 2013) ………………………………………… 6
Figure 3.2 Positioning the CSR policy, Source: (Toyota, 2014)……………………………….7

ii

1.0 Introduction

Contemporary businesses have a tendency towards implementing triple bottom line
and corporate social responsibility (CSR) with having many beneficial purposes.
Consequently, in the first part of this report the concept of triple bottom line will be discussed
while evaluating the triple bottom line activities in Toyota. Secondly, the notion of corporate
governance will critically be demonstrated and it will be related to Toyota. Afterwards, CSR
will be defined using relevant literature and CSR of Toyota will be evaluated. Finally, the
financial performance of Toyota will be analysed.

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1.1 Triple bottom line -287

Traditionally, businesses consider the “bottom line” as revenues and expenses of the
company which focuses only upon the financial aspect (Meadows et al., 1972; Durieu,
2003). However, with time social justice supporters and environmentalists attempt to bring a
wider definition about bottom line which is supportive to assess organisations’ performance
in a larger perspective (Wilson, 2015; Kristensen, 2002). Consequently, the concept of triple
bottom line (TBL) is introduced and it is a term that represents sustainability of a company
which consists of three components: financial, social and environmental (Elkington, 1994,
1997; Wiese et al., 2012). Further, criteria which are considered under TBL are shown in
table 1.1. Moreover, TBL is beneficial to gain sustainable long term competitive advantage
(De Giovanni, 2012). However, practicing TBL and resolving the challenges for sustainability
cannot be faced alone by corporations which certainly require the involvement of all
stakeholders (Trudel & Cotte, 2009; Durieu, 2003).

Table 1.1 Triple bottom line, Source: (Wilson, 2015)

TBL

Criteria

Finance

Financial performance, Market presence, Indirect financial impacts,
Procurement practices

Social

Labour practices, Occupational health and safety, Human rights, Child
labour, Local communities, Product responsibility, Customer health and
safety

Environmental

Materials, Energy, Water, Biodiversity, Emissions, Effluents and waste,
Products and services, Compliance, Transport, Supplier, Environmental
assessment, Environmental grievance
mechanisms

1.2 Triple bottom line in Toyota

Under social aspect Toyota attempts to enhance harmony among people and societies
through listening to customers and communities. Moreover, they invest large capital on R
activities to ensure the traffic safety of customers thus, superior accident prevention and
collision safety features are provided with vehicles. Meanwhile, by implementing monozukuri
(conscientious manufacturing) in the operations process, Toyota focuses to create a
sustainable society. Furthermore, one of Toyota’s key social objectives is human resource
development and through it they try to secure the employees’ right to develop professional

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and personal life. Additionally, Toyota maintains a strong health and safety charter to
eliminate accidents especially in the manufacturing process while providing spiritual support
for their employees.

Moving on, Toyota focuses on environmental stability through producing environmental
friendly cars such as hybrid cars. Meanwhile, they newly engage with biotech, renewable
energy and afforestation practices to maintain environmental stability. Moreover, Toyota
implements lean manufacturing in the operational process in order to minimize waste.
Afterwards financial focus of Toyota will be discussed in the section 4.0. Moving on,
corporate governance will be demonstrated in the next section.

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2.0 Corporate Governance

Corporate governance is broadly referred to the relations, processes and mechanisms
by which businesses are directed and controlled (L’Huillier, 2014; Brennan & Solomon,
2008). Furthermore, the distribution of responsibilities and rights among diverse participants
of the business and comprising rules and its procedures in making corporate decisions is
identified by governance principals and structures (Hill & Jones, 1992; Bonnafous-Boucher,
2005). However, corporate governance incurs extra cost to the organisation while making
conflicts and resisting to change within the organisation (Cohen, Krishnamoorthy & Wright,
2002; Brennan & Solomon, 2008). Nevertheless, effective corporate governance enhances
the quality of the decision making process and ultimately it leads to sustainable competitive
advantage (L’Huillier, 2014; Hill & Jones, 1992). Moving on, corporate governance structure
of Toyota is shown in figure 2.1
Figure 2.1 Corporate governance structure of Toyota, Source: (Toyota, 2014)

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Current governance structure of Toyota was introduced in April 2011, and in 2013,
further structural changes were implemented which was compromised with lesser layers to
facilitate more swift management decision-making. Moreover, through corporate governance
Toyota attempts to effectively achieve their global vision while enhancing management
transparency, compliance, accountability and corporate social responsibility (CSR). Hence, it
is noticeable that Toyota has a major consideration on CSR and it will be discussed in the
next section.

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3.0 Corporate social responsibility

During economic crisis, when equity and consumer markets experienced the loss of
credibility of companies’ effectiveness, its managers faced the dispute in improving the
company’s image while repossessing trust through the development of attractive
organizational distinctiveness (Mar? ?n & Ruiz, 2007). As a result, companies started focusing
on CSR (Cho, Michelon, Patten & Roberts, 2015; Hopkins, 2005). The demonstration of
activities including social and environmental anxiety in organisational operations along with
the connections with its stakeholders towards the organisation’s sustainability can be
referred as CSR (Carroll, 1999; Patten & Zhao, 2014). However, CSR projects bring massive
cost to the organisations (Carroll, 1999; Mar? ?n & Ruiz, 2007), yet organisations consider on
CSR since they have various stances to implement CSR (Johnson, Whittington, Angwin,
Regner, Scholes & Pyle, 2013) which are shown in figure 3.1.

Figure 3.1 CSR stances, Source: (Johnson et al, 2013)

During the last decade many companies in various industries have allocated huge
amounts in developing and practising CSR which are reliable in advancing intangible
characteristics such as trust, brand image and reputation (McDonald & Rundle-Thiele, 2008;
Hopkins, 2005). Moreover, CSR is implemented by companies to attain long-term financial
success and meet shareholders’ expectations (Johnson et al, 2013). However, some
companies focus on social welfare through CSR rather than financial gains (Ghobadian,
Gallear & Hopkins, 2007; Hopkins, 2005).

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Toyota has mainly focused on CSR through their global vision which is “aiming to
achieve sustainable growth and to bring smiles” (Toyota, 2014, p.3) and corporate
governance structure. Further, a key strategy of Toyota to achieve sustainable growth is
implementing CSR activities. Moreover, they position a CSR policy (refer figure 3.2) which is
“contribute to sustainable development” to properly manage CSR.

Figure 3.2 Positioning the CSR policy, Source: (Toyota, 2014)

Toyota establishes guiding principles under CSR policy which are;

“Honor the language and spirit of the law of every nation and undertake open and fair
business activities to be a good corporate citizen of the world” (Toyota, 2014, p. 36).

“Respect the culture and customs of every nation and contribute to economic and
social development through corporate activities in their respective communities”
(Toyota, 2014, p. 36).

“Dedicate our business to providing clean and safe products and to enhancing the
quality of life everywhere through all of our activities” (Toyota, 2014, p. 36).

“Create and develop advanced technologies and provide outstanding products and
services that fulfill the needs of customers worldwide” (Toyota, 2014, p. 36).

“Foster a corporate culture that enhances both individual creativity and the value of
teamwork, while honoring mutual trust and respect between labor and management”

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(Toyota, 2014, p. 36).

“Pursue growth through harmony with the global community via innovative

management” (Toyota, 2014, p. 36).

“Work with business partners in research and manufacture to achieve stable, long-

term growth and mutual benefits, while keeping ourselves open to new partnerships”
(Toyota, 2014, p. 36).

Through Toyota’s guiding principles, it is observable that Toyota’s CSR stance is

maintaining the welfare of internal and external stakeholders while keeping a strong
relationship with them rather than gaining financial benefits. However, Toyota does not focus
on charity activities through their CSR principles. Nevertheless, Toyota is not involving in
marketing their CSR activities in order to develop brand image. Moving on, the financial
performance of Toyota will be discussed in the next section.

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4.0 Financial analysis of Toyota

Primarily, Toyota is based on four markets which are Japan (26%), North America
(28%), Asia (18%) and Europe (9%). In 2014, Toyota gained highest sales revenues from
Japan: 33.2 percent and North America: 30.9 percent. Moreover, Toyota was able to
increase their vehicles sales volume by 16.2 percent in 2014 compared to year 2013.
Further, their post tax profit was drastically grown by 89.5 percent in 2014 than the previous
year. Subsequently, this significant profitability was achieved through various strategies such
as expanding the product portfolio, increasing the after sales services, providing sales
incentives and price discounts and reducing the warranty claims cost by developing quality
levels. Meanwhile, Toyota was able to control material cost through keeping favourable
relationships with suppliers and it directly impacted on their profitability. Furthermore, Toyota
focused more on effectively using six-sigma technique to eliminate defects. Consequently,
they were able to reduce warranty cost through better utilization of six-sigma technique.
Similarly, Toyota maintained the lean manufacturing in a more efficient way to mitigate waste
and it supported them to reduce wastage cost. However, R expenses were increased by
12.8 percent in 2014, since they aimed customer satisfaction through quality and safety
products.

In 2014, return on equity of Toyota was 13.7 percent which was increased by 62
percent than year 2013. Meanwhile, return on assets was increased by 41 percent than
previous year and these ratios indicate that the company has increased its management
efficiency (Atrill & McLaney, 2001). Moreover, Toyota’s current ratio and quick ratio were
respectively 1:4.8 and 1:3.55 which show a slight decrease than year 2013, yet both ratios
are better than the recommended level, hence the company’s favourable liquidity position is
reflected through these two ratios (Atrill & McLaney, 2001). Furthermore, Toyota is a low
geared company which possessed 32.4 percent long term debt ratio in 2014 and it indicates
the better financial stability of the company, thus shareholders’ funds are secured within the
business (Atrill & McLaney, 2001).

However, when analyzing the financial performance of Toyota through its annual
report, it is observable that they have only shown about their strengths yet, there is no any
disclosure regarding their weaknesses. Furthermore, although in the annual report they have
discussed about risk factors of the company, they have not deeply demonstrated the impact
of risk factors on financial stability. Nevertheless, it is noticeable that Toyota is open and
honest in financial reporting and they have not exaggerated a false picture regarding the
company.

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5.0 Conclusion

After analysing regarding Toyota, it can be concluded that they maintain a strong position of
triple bottom line and CSR. Firstly, the notion of triple bottom line was discussed using
theoretical background and further, triple bottom line activities in Toyota were evaluated.
Secondly, corporate governance of Toyota was discussed while underpinning with literature.
Moreover, the concept of CSR was defined while evaluating CSR consideration of Toyota.
Finally, the financial position of Toyota was analysed using its annual report.

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